The Importance of Building a Good Credit Score Before Buying Your First Home.
What is a Credit Score in South Africa?
A credit score is a three-digit number that reflects your creditworthiness, based on your credit history. In South Africa, credit scores typically range from 0 to 999, with higher scores indicating a lower risk to lenders. Major credit bureaus like Experian, TransUnion, and Compuscan calculate these scores using your borrowing and repayment behaviour.
Here’s a general breakdown:
- Excellent (767–999)
- Good (681–766)
- Fair (614–680)
- Poor (583–613)
- Very Poor (0–582)
Why Is a Good Credit Score Important When Buying a Home?
1. Qualifying for a Home Loan
Before any bank or financial institution approves your bond (home loan), they’ll assess your credit profile. A higher credit score increases your chances of getting approved. A poor score, on the other hand, might lead to outright rejection — or limit your access to competitive loan options.
2. Access to Lower Interest Rates
Your credit score directly affects the interest rate you'll be offered. A good score can help you secure a lower interest rate, which can save you hundreds of thousands of rands over the term of a 20- or 30-year bond.
For example:
On a R 1 million home loan at 11% interest vs. 9% interest, the monthly repayments differ by over R 1,300 — that's more than R 300,000 over 20 years.
3. Better Negotiating Power
With a solid credit score, you’re in a stronger position to negotiate terms with banks and compare multiple loan offers. Some banks might even offer discounts on administrative fees or additional perks for applicants with good credit standing.
4. Confidence in the Application Process
Buying property can be stressful. When your credit score is in good shape, you can approach banks and estate agents with confidence, knowing that you meet one of the most important criteria for financing.
How to Build a Good Credit Score in South Africa
If you're just starting out or trying to improve your score, here are some actionable steps:
Start Small with Credit
- Open a store account (like Jet, Mr Price, or Woolworths) or get a credit card with a small limit.
- Use it responsibly and consistently.
Pay All Accounts on Time
- Even one late payment can negatively affect your score.
- Set up debit orders or reminders to avoid missing due dates.
Maintain a Low Credit Utilisation Ratio
- Try to use less than 30% of your credit limit. High usage suggests financial strain.
Avoid Applying for Too Much Credit at Once
- Each application triggers a credit inquiry, which can lower your score if done frequently.
Check Your Credit Report Regularly
- You’re entitled to one free credit report per year from each bureau.
- Dispute any inaccuracies or outdated information.
Timing Is Everything: Start Early
Many first-time buyers in South Africa only start worrying about their credit score once they’re ready to apply for a bond — by then, it might be too late. Credit building takes time, often 6 to 12 months or more. Starting early gives you the space to fix issues, build history, and present a strong application when the time comes.
A good credit score is more than just a number — it’s the key to unlocking your dream home with favourable terms. By building and maintaining a strong credit profile, you not only improve your chances of getting a home loan but also position yourself for better rates, less stress, and long-term financial stability.
Whether you're months or years away from buying your first home in South Africa, start investing in your credit score today — future you will thank you.
Looking for tips on improving your credit or understanding the home loan process? Get in touch with a trusted mortgage advisor or financial consultant to guide you every step of the way.