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Understanding Credit Scores and how to ensure you qualify for a Home Loan

Published on 15 Jul 2025

Understanding Credit Scores and how to ensure you qualify for a Home Loan

Buying your first home is a major milestone, but for many people, the process can feel overwhelming - especially when it comes to qualifying for a bond. And one of the most crucial factors in determining whether a bank will approve your bond application is your credit score.

What is a Credit Score?

A credit score is a numerical representation of your creditworthiness - essentially, how likely you are to repay money that you borrow. In South Africa, credit scores typically range from 0 to 999, with higher scores indicating lower credit risk.

Here’s a general breakdown of credit score ranges:

  • 781 – 999: Excellent
  • 681 – 780: Good
  • 601 – 680: Fair
  • 500 – 600: Poor
  • Below 500: Very poor/high risk

Your credit score is compiled by credit bureaus like TransUnion, Experian, XDS, and Compuscan, based on your financial behaviour.

Why Your Credit Score Matters to Banks

When you apply for a bond, the bank uses your credit score to assess risk. In essence, they want to know the following:

  • Can you afford the monthly bond repayments?
  • Have you shown responsible financial behaviour in the past?
  • Are you likely to default?

A high score gives banks confidence that you will meet your repayment obligations, and it can also help you negotiate better interest rates or even get pre-approval for a bond.

What Factors Affect Your Credit Score?

Credit scores are based on several key factors, including:

  1. Payment History: Consistently paying your accounts on time is the single most important factor. Late or missed payments on credit cards, loans, or store accounts negatively affect your score.
  2. Credit Utilisation: This is the amount of credit you’re using compared to the total credit available to you. For example, if you have a R10,000 credit limit and you use R9,000 of it, your utilisation is 90%—which is considered high. Ideally, keep this below 30%.
  3. Length of Credit History: The longer you’ve had credit accounts open and in good standing, the better. This shows stability and financial responsibility.
  4. New Credit Applications: Every time you apply for new credit, a “hard inquiry” is made on your report. Too many of these in a short time can signal financial distress.
  5. Credit Mix: A healthy combination of credit types (like a credit card, a cell phone account and a personal loan) can have a positive effect - provided they are managed well.

How to Check Your Credit Score

You are entitled to one free credit report per year from each of the main credit bureaus. You can access yours through:

It’s a good idea to make it a habit to check your credit report regularly to spot any errors or signs of fraud.

Tips to Improve Your Credit Score Before Applying for a Bond

Improving your credit score isn’t an overnight process, but with a few smart moves, you can put yourself in a better position to qualify for a home loan:

  1. Pay All Accounts on Time: Set reminders or automate payments to avoid missing due dates. Just one late payment can dent your score.
  2. Reduce Your Debt: If you’re using a large percentage of your available credit, pay it down gradually. Lower credit utilisation boosts your score and reduces financial pressure.
  3. Don’t Close Old Accounts: Older accounts contribute to a longer credit history, which is beneficial—especially if they’re in good standing.
  4. Limit New Applications: Avoid applying for multiple loans or store accounts in the months leading up to your bond application.
  5. Dispute Errors on Your Report: If you find incorrect or outdated information on your credit report, lodge a dispute with the credit bureau. Fixing errors can improve your score quickly.

What Banks Look for Besides Your Credit Score

While your credit score is important, it’s only one piece of the puzzle. Here are some other criteria banks will assess when you apply for a home loan:

  • Income Stability: Are you employed permanently, and have you been with your employer for a reasonable time (typically 6+ months)? Freelancers or self-employed individuals will need to provide additional documentation.
  • Debt-to-Income Ratio: Banks will calculate your monthly debt repayments as a percentage of your income. A lower ratio suggests you can afford new debt, like a bond.
  • Deposit Amount: While 100% bonds are possible, putting down a deposit (even 10%) increases your chances of approval and reduces your monthly repayments.
  • Affordability Assessment: Banks will evaluate your income, expenses, and financial obligations to ensure you can afford the home you want to buy under National Credit Act regulations.

If you're planning to buy a home within the next 6 to 12 months, start working on your credit profile now. Improving your score and managing your debt will put you in a stronger position when it’s time to apply.

Think of your credit report as your financial CV - it tells a story. Make sure it’s one that inspires trust and confidence in lenders.

Also, consider getting pre-qualified with a bond originator like Ooba. They’ll assess your credit profile and help you find the best home loan deals across multiple banks - all without affecting your score. It will also give you a good idea of how much credit you can get which is handy when house hunting – and you’ll have made a head start on your paperwork.

Owning a home in South Africa is achievable—and understanding your credit score is the first step toward unlocking that dream.

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