What can you expect to learn in the credit health education series?

Key Outcome: Learning how to read and understand a credit report will give you the power to know exactly what your credit status is, and what financial and credit potential you have available.

When used responsibly, credit can be a helpful financial tool. Whether it’s taking out a home loan, securing financing for your business, or buying a car with manageable repayments. Access to credit can also help you deal promptly with unexpected, costly emergencies and can offer peace of mind when travelling.

But, when not managed correctly, credit can also lead to crippling debt. It’s important to understand how credit works so you can use credit responsibly. Using credit wisely will help you establish a positive payment history and open up doors to take advantage of future credit including car loans, home loans, credit cards, and personal or business loans. Your credit habits will directly affect your credit report and credit score, which, in turn, impacts everything from future insurance costs to employment opportunities, and housing options.

Ready to get started? Let’s get going below.

Article 2 – Understanding Credit Reports

1. What is in a credit report? Definitions of Credit Report Sections

A credit report is the total history of your financial dealings. Think of it as a track record of your financial health. Every transaction, every request for credit, and every payment made towards debt is put on record. Public information like any court rulings against your name (like foreclosures) will also be kept on your credit report.

The following things will be included in your credit report:

Basic Details

This will include your name, date of birth, identity number, address, and cell-phone number.

Credit History

Your credit history will include: Open and paid credit accounts (such as credit cards, home loans, and personal loans), accounts or loans shared with someone else, your total loan amounts, remaining loan balances, late payments, and as well as accounts that have been handed over for collections.

Credit Score

This number is generated from the results of your credit report. Your credit score is calculated based on your ability to pay back any money borrowed. Having a healthy credit score is essential if you want to borrow money to buy a house or a car, or get a cellphone contract or open a clothing account. Lenders use this score to decide whether to lend to you and on what terms. Credit scores can range from 300 to 850, though some credit score providers may use a narrower range.

Open Accounts and Balances

An open account is any line of credit you’ve opened and never officially closed. Take for example, the paid-off clothing retailer store card you forgot to call about and cancel. Even if you haven’t used a credit card for a few years, it will still show up as an open account on your credit report until you contact the company to close the account.

Recent Credit Inquiries/Requests

These are also known as soft or hard credit checks. If anyone has checked your credit in the past 2 years — for example, landlords, employers, financial services providers, etc — it will appear in your credit report under enquiries.

Public Records and Payment Collections

The financial activity listed here includes events like bankruptcy and judgements against your name. Some judgements can stay on your credit report for as long as 10 years, so it’s best to avoid them at all costs.

2. How to read a credit report

Basic details

It’s important to read your credit report carefully. Double-check the basic details to ensure the details are up to date and correct.

Credit history

Your credit history will make up the bulk of the report. Read through your credit history to make sure the details listed are correct. This history of credit and repayments will greatly impact your credit score.

Credit score

When it comes to reading and understanding your credit score, you’ll need to know how it is calculated and what your score means. This is explained in more detail in our explanation of credit scores below. If possible, see how your score compares to the average score in your area, as well as in South Africa.

Public Records

You ideally want this section of your credit report to be blank but if there are judgements listed, it’s important to double-check them to ensure the details are correct.


Here you’ll see detailed listings of every business that has requested your credit report. Soft inquiries are just from companies wanting to send you promotional materials or current creditors checking your account. Hard inquiries are made when you actually apply for a credit card, personal loan, or home loan.

3. How to read a credit score

When it comes to reading and understanding your credit score, you’ll need to know how it is calculated and what your score means. The higher your score, the better. Generally, a score above 700 is a good score and should give you good access to credit at a preferential interest rate. Anything above 767 is considered excellent and shows you to be a very low-risk consumer that institutions would be happy to give credit to.

Scores below 581 are considered to be below average and a higher risk to financial institutions. Below 526 is seen as unfavourable and you will have difficulty getting finance with a score in that range. In this case, if you do manage to secure credit the interest will be extremely high.

Basic credit score guideline

● 650 to 999 is minimum risk
● 620 to 649 is low risk
● 600 to 619 is an average risk
● 581 to 599 is high risk
● 1 to 580 is very high risk

4. How do credit bureaus calculate scores?

Who are the key players?

Credit scores are calculated by the three nationwide credit bureaus. These include Experian, TransUnion, XDS, and Compuscan. Each bureau has a slightly different way of calculating your credit score. But, it all comes down to the same principle (i.e. a score based on your credit habits). You have one free credit score from each of these three credit bureaus per year.

The basic methodology they use for compiling credit scores

Each credit bureau has its own way of doing things. They follow the same rules and guidelines as set out by the NCR (National Credit Regulator), but they have their own way of interpreting your information. One credit bureau may regard a specific detail with more concern than another. They apply different calculations and will come to different credit scores for the same person.

The lenders who have given you finance, for example, need to report your credit transactions to the credit bureaus. But, sometimes they only report it to certain credit bureaus. Therefore, the credit bureaus may have different information about you. So they will give you different credit scores, especially when they have different sets of information about you.

Because your credit score differs from one credit bureau to another, you need to use the combined results of more than one credit score to get a better representation of your credit health. Remember some lenders only report to certain credit bureaus.