What to do if you don't have a credit score

11 AUGUST 2023

Having a credit score is an important key to unlocking loans and credit to get you closer to your dreams.What to do if you don't have a credit scoreThere are some reasons why you may not have a credit score and a few ways to help you build a good one to get the best interest rates available to you.

Why do I have a zero credit score?

Credit scores are indicators of your relationship with credit in the past. Your credit history starts when you open a credit account with one of the major credit bureaus in South Africa. A few reasons why you may not have a credit score are;

  • You have never opened a credit account - If there is no record of you having credit in your name, then there is no way to calculate a credit score from no past credit history.
  • You haven’t used credit in the past year - If you have a credit account, it’s important to keep it active and use it. Make occasional purchases with credit so that you can make monthly repayments on time. This is key in calculating a credit score. Good payment history shows that you can manage payments and thus get you a higher credit score, to represent your lower risk to lenders. Learn how to use credit to your advantage.
  • You have no experience using credit responsibly - Being young and figuring out how to manage your finances is a big step in becoming an adult. As a place to start building a good credit score, apply for a credit card to make a few purchases. Make sure you pay your instalments on time.
  • Your credit account is still new - If you’ve just recently opened an account, it may take some time for your credit score to build. After you’ve made payments for some time into the account and form a positive credit history, results will be worth it.
  • You have declared bankruptcy - If you’ve recently filed for bankruptcy, that will appear on your credit report for some time. It can prevent you from getting credit or a loan as it is a potential warning sign to lenders. This can affect your credit score, by lowering your chances of improving it.

Why do I need a credit score?

Lender, banks and credit unions profit from lending money or credit to people who will pay it back over time along with interest. Your credit score and credit history is an indication to lenders that you can pay back credit and are therefore a low risk to them. Based on the level of risk you portray through your credit score, your application could be rejected or accepted.

A good credit score gives you a better chance to be approved for a credit card or a loan. It also gives you some power in negotiating for more competitive interest rates or loan terms. This gives you access to credit that has a lower cost to you. You could also apply for high credit limits if your credit score shows that you do not default on loans. Your credit score helps you in the process of buying a house or getting approved for rental apartments.

How do I build a good credit score?

First of all, what is a good credit score? Credit scores are rated between 300 and 850. A low score falls below 579, fair between 580 and 669, and good is anything above 700. You can build your credit score to a good level by doing the following;

  • Open a bank account - Use your bank account daily to get used to managing your money and staying on track with payments.
    Pay your rates and bills on time - Stay on top of your rent, water and rates so that you don’t fall behind on your payments and build a good payment history.
  • Apply for a credit card with a low limit or store card - These cards will be more manageable, as you’ll pay smaller repayments each month.
  • Use your credit responsibly - Avoid making expensive unnecessary purchases with your credit, and incurring debt that you cannot repay. Learn how to control your credit spending.
  • Keep an eye on your credit report - Try to regularly check your credit report and monitor your credit score to see if your efforts are increasing your credit score. Or if you need to review your plans.
  • Apply for a credit builder loan - These types of loans will help you get good credit by making fixed monthly payments.

It’s never too late to build a good credit score and give yourself better opportunities in your financial future.