How to calculate your credit score – and 8 ways to improve it

National Credit Regulator data shows that 54% of South Africans have their applications for credit such as car finance, home loans and personal loans rejected. If you’ve been given the cold shoulder by your bank or lender, it could be that your credit score is to blame, says ClearScore.

Being rejected by a bank or lender can happen to anyone. A bank might reject an application for various reasons, including having a bad or little credit history, the financial technology business that gives customers free access to their credit score and report, said.

Lenders look at your credit score and credit report to assess your credit application. Most people don’t know that their credit score – essentially a numerical rating of their creditworthiness – could be one of the key culprits, said Justin Basini, founder and CEO of ClearScore.

This is why knowing your credit score and the contents of your credit report can help you avoid being rejected for a loan. With access to this information, you can see what the bank or lender sees, so that you can take steps to improve your score and boost your chances of being accepted for a loan, he said.

Your credit report is like your financial resumé

Start by thinking of your credit report as your financial resume. Just as potential employers will look at your work resume to decide whether to hire you, a lender will look at how you’ve handled credit in the past to decide whether to lend to you, ClearScore said.

If your credit report shows that you’ve handled credit well, always paying back what you’ve borrowed, this shows the lender that you’re less risky. The higher your credit score, the less risky you are to the lender, and the more likely you are to be accepted, it said.

Your credit report contains your financial history, including how and when you repay your debts, how much you owe, and how long you’ve been using credit. Your credit score is a three-digit number calculated using your credit report – it’s like a grade of your credit report.

You can access your score and report 24/7 for free, forever by registering online.

Being able to keep tabs on any positive and negative fluctuations in your credit score at more regular intervals allows you to intervene and to track whether there has been an improvement in your score after you have taken action, ClearScore said.

Simple steps to improve your score

A low credit score may make it more difficult to get credit. If your score is low, there are many ways that you can start to improve it.

“The good news is that everyone can take some simple steps to improve their credit score. Your credit score is not determined by your income, so while not everyone can have an ‘excellent’ credit score, there are steps we can all take to improve ours,” Basini said.

Tips to boost your credit score

  • If you identify anything in your report that you think could be wrong or could possibly be fraud, such as identity theft, contact a credit score business and have these details removed from your report.
  • Pay off your credit card, phone bills, and other debt regularly and on time.
  • If paying off your loan becomes difficult, discuss this with the lender.
  • If your loan application was rejected, check your credit score to see if that may have been the reason before applying again.
  • Check how likely it is that your loan application will be accepted before applying.
  • Don’t max out your credit cards. A high credit utilisation rate makes you look too dependent on credit, increasing your risk profile and hurting your credit score. Try using less than 50% of the credit available to you.
  • Build your score by using small amounts of your available credit and consistently paying off your debt at the end of each month. This shows a lender that you can borrow responsibly.
  • Having little or no credit history negatively impacts your credit score. Consider applying for a credit or store card, or cell phone contract, to borrow small amounts and pay off those amounts consistently.

The higher your score the better your credit health will be, which will be an advantage when applying for a home loan, making it easier for you to borrow money at lower interest rates.


Read: This is what your credit score should be and how to improve it

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How to calculate your credit score – and 8 ways to improve it