We hear about ‘good credit’ all the time. What does it really mean? Credit scores are used by a variety of lenders to assess your creditworthiness. Your credit score may seem like an arbitrary number, but it is a system based on actuarial data science that gives the lender an idea of your credit risk profile. When you do good things, like pay on time and keep your credit use low, you will be rewarded with a better credit score. If you default on credit, pay late, or don’t pay at all and get a court judgment against you, it will negatively impact your credit score.
So far, it all makes sense, right? What confuses a lot of people is the number itself. Credit scores in South Africa work on a point system, with 850 being the maximum score you can get. Today, we will unpack some of the mystery around these numbers, including what is considered a good score and an average score. We will also look at some of the doors that that good credit score can unlock.
What is Considered a Good Credit Score?
Credit scores of over 670 are considered good in South Africa. This is more than 100 points higher than the national average, but since most of us have very bad credit habits, that’s not a target to settle at! Once you are doing better than most other South Africans, however, you become a more appealing credit risk to lenders and are likely to see many doors opened by your attractive credit score.
If you can improve your score to over 740, you will move into the ‘very good’ range, and if you hit 800 or higher, your credit score is considered excellent. It’s highly unlikely any lender will turn you away with such a stellar credit score. Keep working on it!
What is an Acceptable Credit Score?
In South Africa, if you have a credit rating above 580 and below 669, you have an acceptable credit score. It isn’t fantastic by any means, but it is better than the national average and indicates you are doing well enough with your credit. You may have a few issues (typically late payments) but aren’t doing too badly at all. Many South Africans have a credit score in this range. They can still access credit and most lenders will take a risk on them. You may not receive the best lending rates and terms, however.
How Much Can You Borrow With a 700 Credit Score?
If you have a credit score of 700 in South Africa, that is considered very good. You are well above the South African average of 560-580 and have shown your lenders that you can responsibly use credit. While you may not yet have the max credit score of 850, you are a far better than average credit risk, and most lenders will be happy to offer you credit.
So, how much can you borrow with your shiny 700 credit score? There is no one answer for this because your credit score is only part of the picture. All it does is show lenders how responsible you are with the credit you have. How much they will offer you in new loans will depend on other financial health factors, such as how much you earn and how much you already have invested into lines of credit. Can you pay back a new loan? How much can you take out of your monthly budget before it puts you under financial strain?
Your lender will look at these factors, too. While a great credit score like 700 will ensure you can access the most credit possible at very favorable terms, the exact Rand value on that credit line will be determined by the other factors we mentioned.
Can I Borrow Money with Bad Credit?
South Africa is not a nation of responsible financial habits. Our national average credit score isn’t even in the range considered good! So while a credit score in the high 500s is only considered poor to fair, it is still the reality for many South Africans, and once you pass 580, you are doing better than average.
So if you are wondering if you can borrow money with bad credit, the real question is how bad that credit is. If you are below the national average, you will be seen as a greater risk than someone at that level or higher. Reputable lenders will be less likely to consider you at all. And if they do, it is liable to be at very unfavorable rates. If you are average, you will get average rates and average access. If you are doing better than average, lenders will want to deal with you.
Unfortunately, we aren’t very good at being told, ‘No’, either. Or at correctly identifying financial need vs financial want. This has led to a range of ‘lenders’ who advertise on the back of no credit checks or accepting ‘bad’ credit. That doesn’t mean you should rush to take them up on the offer, however! We understand that sometimes there is a financial emergency and you need any help you can get- but getting trapped in the payday loan cycle, or going to dodgy, predatory ‘lenders’ who are effectively loan sharks charging astronomical interest rates is unlikely to be the answer to your financial woes.
They will make them considerably worse! So before you ask yourself if you can get loans on bad credit, be very, very realistic about how smart of a plan that is. You would do better to put in the effort to stabilize your finances and improve your credit score rather than chasing more loans you clearly can’t afford to pay back. It’s easy to convince ourselves that ‘one more’ will solve our problems, but that is rarely the case.
Now you know more about good and bad credit scores in South Africa, you can take charge of your financial future and improve your creditworthiness. It all starts with knowing where you are, and how to get where you want to be.
