What Is Credit Score?
A credit score is a numerical expression based on a level analysis of a person’s credit files, to represent the creditworthiness of an individual. A credit score is primarily based on a credit report, information typically sourced from credit bureaus.
Lenders, such as banks and credit card companies, use credit scores to evaluate the potential risk posed by lending money to consumers and to mitigate losses due to bad debt. Lenders use credit scores to determine who qualifies for a loan, at what interest rate, and what credit limits. Lenders also use credit scores to determine which customers are likely to bring in the most revenue.
Credit scoring is not limited to banks. Other organizations, such as mobile phone companies, insurance companies, landlords, and government departments employ the same techniques. Digital finance companies such as online lenders also use alternative data sources to calculate the creditworthiness of borrowers.
What Are The Types Of Score Credit?
Open credit, also known as open-end credit, means that you can draw from the credit again as you make payments, like credit cards or lines of credit.
Closed credit, also known as closed-end credit, means you apply for a set amount of money, receive that money, and pay it back in fixed payments.
Categories Of Credit Score?
Credit scores typically range from 300 to 850. Within that range, scores can usually be placed into one of five categories: poor, fair, good, very good and excellent.
Why Is Credit Important?
Having access to credit allows you the flexibility to get something now and pay for it later. Credit can help you do things like buy a house or a car, or finance your education, but it’s also a major responsibility that’s important to understand before you start to take on debt.
What Is The Best Credit Score In South Africa?
Here’s a more detailed breakdown:
- 781 to 850. Excellent.
- 661 to 780. Good.
- 610 to 660. Fair.
- 500 to 610. Poor.
- 300 to 499. Very poor.