Your credit score can mean the difference between being denied or approved for a home loan, personal loan or motor finance. It can also determine whether you’ll get a low or high interest rate. A good credit score will also help you qualify for a property rental agreement with a little or no deposit. It has many advantages when it comes to most financial purchases, but what makes a good credit score?
What is a Credit Score?
Your credit score is a 3 digit number generated using your credit report. It is designed to help to predict the likelihood that you will repayment the full loan.
What goes into a Credit Score?
Data from your credit report goes into 5 major categories that make up the elements of your credit score:
- Payment History: (35 percent)
Your account payment history accounts of the biggest weighting on your credit score. It has the biggest impact on your score. This means that if you hope to improve your score, you’ll need to pay all your accounts on time and in full every month.
- Amounts Owed: (30 percent)
How much you owe on your accounts has a second biggest impact on your credit score. The of available credit you are using on revolving accounts is heavily weighted.
- Length Of Credit History: (15 percent)
How long ago you opened accounts. In this case, the odder the account is the better.
- Types Of Credit Used: (10 percent)
The mix of accounts you have, such as revolving and installments plays a small but important role in determining your credit score.
- New Credit: (10 percent)
And finally if you have recently opened a number of new accounts, you credit score will have taken a hit and dropped a little.
How To Check Your Credit Score:
SA law mandates that all consumers have the right to one a free credit report annually from each credit reporting agency.