Even the Woolies Card? Credit Score for a Home Loan in SA
TL;DR: There's no single credit score that unlocks a home loan in South Africa. Each bank sets its own cut-off, and each bureau scores differently. A higher score improves your chances and your interest rate. Three habits move it: paying on time, keeping balances low, and opening no new credit before you apply.
Okay, so: three digits. That's all it takes to decide your interest rate before you say a single word to the bank.
Most people have never checked theirs. Or they checked once, saw a number, and had no idea whether it was good or kak.
So what credit score do you need for a home loan?
There isn't one number.
South Africa has several credit bureaus, and each one calculates its score on its own scale. Each bank then sets its own cut-off, and that cut-off moves depending on the loan, the deposit and the rest of your profile.
So anyone quoting you one magic number is simplifying. What's true across all of them:
A stronger score makes approval more likely
A stronger score usually gets you a better interest rate
A weak score can sink an application even when your income is fine
Why does the interest rate matter so much?
Because of time.
A home loan runs for twenty or thirty years. A small difference in the rate, repeated every month for that long, adds up to a very large number of bucks. I'm not going to give you a figure, because it depends on the loan. Ask an originator to show you the same bond at two rates. You'll see it immediately.
It's why I've had an originator go back to the bank and fight for a better rate on my behalf. The rate is worth arguing about.
That's the real cost of a poor score. Not the decline. The approval at a worse rate that you live with for decades.
Get the structure right first. The Directors Fortress is the step-by-step for buying property in a company name. R99 once off. Start here
What moves a credit score?
Three things do most of the work.
1. Pay everything on time, every time. Payment history is the biggest factor. Cell phone contract, store card, car, insurance. Ja, even the Woolies card. A late payment on a small account counts.
2. Keep balances well below the limits. A card that's always near its limit tells a lender you're stretched, even if you never miss a payment.
3. Don't open new credit before you apply. New accounts and several credit enquiries in a short time make you look like you're hunting for money.
And one more. Have some credit history. No accounts at all means there's nothing for the bureau to score. A small account, paid perfectly, beats a blank record.
How do you check your credit report?
You're entitled to see what the bureaus hold on you. Under the National Credit Act, a consumer can request a free copy of their credit report from each registered bureau once a year.
Get it. Read every line. Look for:
Accounts you don't recognise
Accounts shown as open that you closed
Late payments you can prove were paid on time
Old judgments or defaults that should have been removed
If something is wrong, dispute it with the bureau. They have to investigate. Do this months before you apply, not the week before.
How long does it take to fix a credit record?
Longer than you want.
A record improves as months of on-time payments build up. There's no shortcut, and nobody can legitimately "clean" an accurate record for a fee. If some oke on Facebook offers to, walk away. That's a tsotsi with a website.
Give it six months of perfect behaviour as a minimum before a home loan application. A year is better.
Does buying in a company get around your credit score?
No. And be suspicious of anyone who says it does.
A new company has no credit history of its own. So the bank looks through the company to you. You sign surety, and your record gets weighed.
Think of it as the horse, the course and the jockey. The deal is the horse. The structure is the course. You're the jockey. A new company doesn't remove the jockey. The jockey still gets weighed.
What the company changes is what else the bank weighs. It also looks at what the property earns, so the deal isn't judged on your payslip alone.
The catches
Every bank is different. A score one bank declines, another may accept.
A good score doesn't mean approval. Affordability, the valuation and the property all still count.
Disputes take time. Start early.
Paying off and closing every account isn't always best. Lenders want to see credit handled well, not avoided.
A company doesn't hide a bad record. It sits on top of yours.
Where the company fits
Your credit record is yours, in every structure. Fix it first. It's the one part of property that costs nothing but discipline.
While it improves, get the paperwork right. Registering the company costs a few hundred bucks and doesn't care what your score is. Finding and reading your credit score is a lesson in The Vault. Container first.
FAQ
What is a good credit score for a home loan in South Africa?
It depends on the bureau and the bank. Scales differ, so ask a bond originator how your specific score is likely to be viewed.
Can I get a home loan with a low credit score?
Sometimes, often at a higher interest rate or with a deposit. Improving the score first usually saves money.
How can I check my credit score for free?
You can request a free credit report from each registered credit bureau once a year under the National Credit Act.
Does checking my own credit score lower it?
No. Checking your own report isn't the same as a lender's credit enquiry.
Does a company have its own credit score?
An established company builds its own record. A new one has none, so the bank assesses the director who signs surety.
Related reading
Get the foundation right
The Directors Fortress gives you the investor-friendly offer to purchase, the blueprint for registering the entity, and a walkthrough of the structure I use. R99 once off, yours to keep.
Education only. This article is general information, not tax, legal or financial advice. Speak to a registered tax practitioner, attorney or financial adviser about your own situation.
Sources
National Credit Regulator: ncr.org.za
National Credit Act 34 of 2005
About the author
Michael Bowen co-founded ZAHomes. He bought his first property in 2003 on the outskirts of Amsterdam, with a 100% mortgage, at the wrong point in the cycle, and lost over €14,000 on it while sanding the floors himself in a heatwave. Twenty-odd years, 40-odd countries and a lot of property school fees later, he lives in Cape Town and teaches South Africans to buy and hold property inside a company. His view hasn't changed: an investor's greatest assets are the lessons from their failed deals.
