Understanding Your Credit Score_Part 1

Adv Kate Thambiran @ Lucid Living

I’m certain that most of you can still remember the anxiety associated with getting your matric report card. University entrance, the prospect of a professional career and a well paying position all depended on this all important grade.

Today let me introduce you to the single most important post-school grade that wields as much influence and power, over your personal financial affairs: your credit score.

1 What is a credit score?

A credit score is a 3-digit numeric value that appears on your credit report. Roughly defined, the credit score is a “summary” of the detailed information in your credit report. Credit scores range between 0 – 999. They offer an instant determination of your credit risk, with a low credit score indicating a bad risk and a high credit score a good risk.

2 How is my credit score determined?

A credit score are calculated from different credit information in your credit report. This information can be grouped into five categories –

2.1               Payment history (35%);

2.2               Amounts owed (30%);

2.3               Length of credit history (15%);

2.4               New credit (10%); and

2.5               Types of credit (10%).

The percentages reflect how important each of the categories is in determining your credit score.

Different credit bureaus (currently 11 registered with the National Credit Regulator) use different scoring systems to generate a credit score. However, the fundamental principles apply and your credit scores across all credit bureaus should be relatively similar.

Experian, TransUnion and XDS (the 3 largest credit bureaus) all have a credit score attached to each consumer credit report.

3 What is my credit score used for?

In today’s really fast, really big and really automated credit environment credit decisions are made using analytic tools, like credit scores. These systems simply retrieve your credit score from the credit bureau and largely ignore all the underlying information on your credit report. The credit score drives their analytic tools and ultimately their decision to approve or decline your application for credit.

The power of the credit score doesn’t end there. This potent 3-digit number is relied on to determine –

  • The size/value of your credit facility;
  • The interest rate;
  • The re-payment term; and
  • Whether or not you will need to provide security (e.g. a deposit or surety).

Generally, a credit score of 680 and above is considered good enough to get you credit on ordinary lending terms (e.g. prime rate, 10% deposit etc.). Credit scores above 750 should secure you preferential terms (e.g. prime less 2%, no deposit etc.). This is however subject to the particular credit provider’s credit policy.

4 How can I see my credit score?

Your credit score appears on your credit report. You can obtain your credit report from Lucid. Once you retrieve your credit report you will see your credit score and what your financial report card looks like.

Fortunately, unlike your matric results, your credit score can be improved. Your credit behaviour determines this credit score, for better or worse. In our next instalment on this segment, we give you all the tips you need to improve your credit score.

Understanding Your Credit Score (Part 2)


  1. I had no idea that my credit score played such a significant role in my credit applications.
    I got my report off your site and my score is 720. I was relieved.
    Thanks for the great ionformation.

  2. I bought my credit report from TransUnion, but it did not have my credit score.
    After reading this article, i’m really curious as to what my score is.
    Is TransUnion suppose to include my credit score in the report?

  3. the best way to build credit is to start out small.. my financial adviors told me to get a low interest loan from a credit union and make the payments on time; everytime, and that getting a bunch of credit cards at smaller department stores, is horrible for your credit, you should get one card you can use anywhere, and don’t let the balance get to be over 20% of offered credit. if you have a limit of $1000.00 don’t let the balance at the end of the month be over $200.00 That effects your debt to income ratio, which isn’t necessarily on your credit but lender’s will ask for that information. (how much you make in a month vs. how much you spend or owe)

  4. your website is exactly the same as consulting with an advisor. i liked your website a great deal. thank you.

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