Your credit health report and credit score are like a photograph that shows you what your money situation looks like. Read here to find out how to understand your picture.
The different credit bureaus all present their credit reports in slightly different formats. However, all credit reports contain this basic information.
Personal information
Before looking at the detail of your credit score, you must check that the information on your report is correct:
- Your name, surname and ID number
- Last bureau enquiry – did you make this enquiry? If not, do you know who did, for example, a credit provider where you applied for a loan, or a person from whom you wanted to rent a property?
- Summary of your accounts and payment history – are these all your accounts and do you agree that you have missed any payments?
If any of this information is not right, you must contact the credit bureau immediately and ask them to correct your report. Wrong information can have a negative impact on your credit record and your ability to get a loan on the best possible terms.
Credit bureau contact information
The report includes the contact details of the bureau that issued it, as well as the steps to follow if you want to dispute anything on your report
Your credit score
The different credit bureaus use slightly different formulas to calculate a credit score, but here is a general guideline of what your score means:
GREEN (680 and more)
- Thanks to your healthy financial habits, your finances are under control.
- You are any financial institution’s ideal customer.
- Your excellent score gives you access to credit.
- ORANGE (500 to 680)
- If your score is closer to 500, you are a credit risk and credit providers will be reluctant to give you access to more credit.
- If your score is closer to 680, you are a good debtor, and you probably qualify for most credit services and facilities.
RED (500 and lower)
- Your score shows that you have not been a responsible borrower and that you have defaulted on your payments.
- It is highly unlikely that you will get credit from any institution registered with the NCR.
- However, Bayport Money Solutions can help you.
What makes up your credit score?
The credit bureau uses these 6 blocks on the credit report to calculate your credit score:
1. Legal: This refers to judgements or administration orders that were issued against you by a court. They show that, in the past, you could not meet all your debt obligations. Zero judgements are good for your score; anything else is bad for your score.
2. Too much debt: You should never use more than 35% of the credit available to you. For example, if your credit card limit is R5 000, never owe more than R1 750 per month.
3. Credit enquiries. Every time you apply for a loan, the credit provider checks your credit report. The credit bureau sees too many enquiries at the same time as a warning that your finances are not healthy, and that counts against your score.
4. Payments. Every late or missed payment reduces your credit score.
5. Defaults. If you have missed three payments, you are in default on an account. The more defaults you have, the lower your credit score will be.
6. Accounts. You need accounts to build a credit history, but too many accounts shows that you don’t know how to work with credit and how to manage your debt. The more accounts you have, the more likely you are to use more than the 35% of credit available to you.
If you have never seen a credit health report before, it can be an intimidating document at first glance. But don’t let it scare you! A Bayport agent will be very happy to work through your report with you and explain all the information and what it means.
Understanding and then taking action on your credit report is the best way to bring your debt under control. And that is a powerful first step on the road to lasting financial wellness.
