No reason why you shouldn't know your credit score
While we understand the need for credit, we also care about your financial health. If credit is used irresponsibly, you might find yourself in real financial trouble. It is important that you understand how credit will impact your credit score.
Before you apply for credit, get a clear picture of your financial health. One of the simplest ways to do this is through your credit score. It is a quick and easy exercise and it won’t cost you a cent.
Most credit bureaus allow you to access one free credit report a year. At African Bank, you can access your credit report as often as you like. We suggest you do so once a month.
So, what is a credit score and a credit report? Why is it so important? Your credit score is a numerical value used by credit providers and landlords to assess your credit risk. Your credit report, on the other hand, is a history of your past financial behaviour in terms of how you have used and managed credit. This information includes a history of non-payment and notices or judgments under your name, as well as an overview of any amounts you currently owe on credit. This data is used to determine your credit score.
Credit score guideline
650 - 999 is minimum risk
620 - 649 is low risk
600 - 619 is average risk
581 - 599 is high risk
1 - 580 is very high risk
From the guideline above, it is clear that for banks and other credit providers to approve credit for you, your credit score needs to be good. These institutions need to know that you will make regular payments and pay off your debt within the times agreed to on your contract. A high credit score implies that the risk of you defaulting on your payments is low. Having a good credit score also works in your favour because your bank could give you your loan with a lower interest rate. Remember, the higher the interest on a loan, credit card, overdraft etc., the more it will cost to pay off the debt.
If, however, you do not have a long history as an active credit user — for example, you have just finished university and you are starting your first job, or you have just never had the need to access credit — this can be a disadvantage. The reason is that before your bank gives you credit, they need some way to measure or predict that you will be able to pay your obligations on time. One of the best ways to build up your credit score is to take out a cellphone contract, or apply for credit card with a minimum balance that you can pay without putting yourself under financial strain.
To maintain a good credit score or improve it, all you have to do is pay all your obligations on time or, even better, pay a little extra every month towards your debts.
If you’re thinking about buying a car or a house, and you plan to apply for car financing or a bond, check your credit report before meeting with a lender. Being familiar with the information in your credit report provides clues as to whether a lender will approve your request or not. It also shows that you care about your credit score and have taken responsibility for it. If you are in good standing, your credit report can be a powerful negotiation tool for a lower interest rate.
The benefits of knowing your credit score go beyond just being able to borrow money from the bank. Going through your credit report can also reveal if you have been a victim of financial identity theft. Your credit report will allow you to spot, for example, a judgment against you for an account that you know very well you never opened or a line of credit you have never applied for.
Having your identity stolen can ruin your credit score and cause havoc in your financial life. Request your free credit report at African Bank to ensure that your credit profile remains accurate.