A credit score is a numeric number from 0 to 705 used by lenders when applying for a loan.
Your credit score will determine whether you qualify for the loan or not.
It’s based on the analysis performed by credit bureaus in South Africa. The score is carefully calculated based on your experience with paying debt or credit to help lenders make the right loan approval decision.
Simply, the higher the score, the better the chance you’ll have to qualify for the loan.
Why is Credit Score so Important?
In the past, approving personal loans was a difficult process for banks to see who really qualifies for the loan amount they’re applying for.
The introduction of credit ratings made the loan application process much better and efficient for both the consumer and lender.
The decision-making has since improved with the use of credit scores and finally, loan seekers can now borrow the amount they qualify for.
I know life happens and some situations may need access to quick cash. However, it’s also very risky to apply for credit in desperate times.
So your credit score will help you secure the most affordable personal loan, at the best possible interest rate.
What’s a Good or Bad Credit Score?
According to ClearScore, a good credit rating is any score calculated over 650. If you have a credit score over 670, you’ll have excellent ratings.
The same goes for bad credit is any score rating from 0 to 649.
This credit score rating plays a huge role in your creditworthiness. It’ll assist in negotiating affordable personal loan rates that best suits your needs.
So having a poor credit score tells lenders that you haven’t been perfect with paying your bills or you don’t have enough credit history to trust you with a huge loan amount.
While building and improving your credit score, at first, banks are going to charge you a higher interest rate to maximize the risks taken.
How To Maintain Your Score
Often people unknowingly make decisions and take actions that will affect their credit score negatively.
So the first step to maintaining your score rating is to always check your credit report every month. This will show you what has changed in your score and what impacted that change.
Always pay the minimum installment on time on your existing debt. This proves the responsibility and honor of loan contracts you’ve agreed upon.
Lastly, stop applying for multiple loans at the same time. Try to find other ways to make extra money, to avoid always depending on loans to make means.