Whether you’re buying an apartment, a brand-new development home or a free-standing house, you’ll undoubtedly have to take out a bond and pay it off, which means, borrowing money from a reputable lender. Hopefully, you’ve been maintaining a good credit score, which means the odds are in your favour.
However, if you haven’t, it’s also not the end of your home-buying journey, you’ll just have to put that dream house on hold for a bit.
What is a credit score?
All credit active South Africans have a credit profile. This is a summary of your history with every credit provider you’ve ever dealt with, and serves as a record of how well you’ve managed your credit accounts.
Credit bureaus summarise your credit profile into something called a credit score. A high credit score means you have good credit capacity. Lenders like SA Home Loans look at your credit profile and credit score to find out about your previous credit behavior and assess if you are able to take on a new loan. This information reassures lenders that you’re good at paying money back to those you’ve borrowed from – i.e. you are a ‘low risk’ client.
A good credit score not only makes you more likely to get approval on your home loan application – but it also means you’ll qualify for a better interest rate. If you have a poor credit score, you will be less likely to qualify for any new loans. This protects clients with low credit scores from taking out additional loans and from overextending themselves and getting into more debt.
In short, you’ll need to have a good credit score rating for your home loan application to be approved. It’s therefore a good idea to first find out what your credit score is before applying for a loan, and to give yourself time to improve it before approaching a lender.
How to check your credit score
Watch the short video below to find out more. You can also go to our special section on the Homes4Me app that deals with this subject in depth.