Credit scoring can feel like a black box. The exact formulas are secret, but the main ingredients are well known.
Understanding them lets you decide where to spend your effort. Here are the five factors behind credit scoring and what they mean for your habits.
What goes into credit scoring?
| Factor | What it looks at | What helps |
|---|---|---|
| Payment history | Whether you pay on time | Pay every account by its due date |
| Amounts owed | How much of your limits you use | Keep balances well below limits |
| Length of history | How long accounts have been open | Keep old accounts in good standing |
| New credit | Recent applications and new accounts | Apply only when needed |
| Mix of credit | The types of accounts you have | Use credit types you can manage |
Bureaus do not publish exact percentages for each factor, and they differ from one another. Anyone claiming a precise formula is guessing. TransUnion explains its own score on its credit score education page.
Which factor matters most in credit scoring?
Payment history is generally the biggest. A missed payment on a recent account can hurt more than many small positives.
That is why the best advice is the least exciting: set up reminders or debit orders, and pay on time.
How does using your limit affect your score?
Take a card with a R10,000 limit. A balance of R9,000 uses 90% of the limit, which looks like heavy reliance on credit. A balance of R1,500 uses 15%, which looks far more comfortable.
Many people aim to use only a small part of each limit. A lower balance can improve your score within weeks, once the lender reports the new figure.
Why do credit scores differ between bureaus?
Each bureau receives data from different lenders and uses its own model. If a store reports to only one bureau, only that bureau’s score shows it.
Read what a good credit score is for TransUnion’s bands, and what a credit bureau does for how the data flows.
What lowers a score quickly?
- Missed or late payments.
- A default or a legal listing on your record.
- Cards that are close to their limits.
- Several loan applications in a short time. See multiple loans.
- Errors on your report, such as an account that is not yours.
If your score dropped suddenly, check your report for a new entry or an error before you assume your behaviour is the cause.
How long does it take to improve?
It depends. Reducing balances can help within a month or two. Rebuilding after missed payments takes months of steady behaviour.
There is no instant fix. For a plan you can follow, see how to improve your credit score.
What is not part of credit scoring?
Most scores do not include your income, savings or where you work. Lenders ask for those separately when they assess affordability.
That is why a person with a modest income and a good record can sometimes get credit, while a person with a high income and a poor record may not.
How long does information stay in the score?
Different parts of your record stay for different periods under the National Credit Regulations. Enquiries can stay for up to a year, and payment history for up to five years. When an entry reaches its limit it drops off, and your score updates.
How can two people with the same income get different results?
Credit scoring looks at behaviour, not salary. Here is a hypothetical comparison of two people who both earn R15,000 a month.
| Person A | Person B | |
|---|---|---|
| Payments | All on time | One late payment last month |
| Card balance vs limit | About 20% | About 85% |
| Applications in six months | 1 | 6 |
| Likely result | A higher band | A lower band |
Nothing in the table is about income. The scoring models read the habits, and the habits explain the gap. That is encouraging, because habits can change.
Do lenders only use the bureau score?
Often not. Many lenders also run their own scorecards, which combine the bureau data with other information, such as your income and bank statements. Some use a different model for existing customers, based on how an account behaves.
So a good bureau score is one input. The decision also depends on the lender’s rules and on affordability, which the National Credit Act requires a lender to assess. That is why one lender may approve what another declines.
Which habits give the best return for the least effort?
| Habit | Effort | Effect |
|---|---|---|
| Set debit orders for the minimum payment | Low | Protects payment history |
| Pay card balances down before the statement | Medium | Lowers the share of your limit used |
| Wait between applications | Low | Fewer enquiries |
| Check your report yearly | Low | Catches errors early |
| Close old accounts | Low, but risky | Can shorten your history |
Start with the first row, because a missed payment is the costliest mistake and the easiest to avoid. See building credit if you are starting from a thin record.
What does credit scoring say about your future?
A score is a prediction of how likely you are to repay on time, based on how people with similar records behaved. It is not a judgment about you, and it is not fixed. As new payments are reported, the prediction changes.
Knowing that makes the process less intimidating. You do not have to master a formula. You have to repeat a handful of good habits long enough for the record to show them.
Read what a good credit score is for the TransUnion bands, and how to check your credit score to see where you stand.
What does credit scoring mean if you have no history?
A person with no accounts has a thin record, so there is little for a scoring model to read. That is not the same as a bad score.
It means lenders have less evidence, so they may offer smaller amounts at first and rely more on your bank statements.
Start with one small account that reports to a bureau, use it lightly and pay on time. After a few months, the record has something to show. See building credit for the first steps, and avoid the temptation to open several accounts at once.
Frequently asked questions
Does closing an old account lower my score?
It can, because it may shorten your history and reduce your available limit. Think before you close a long-standing account in good standing.
Do I lose points for checking my own score?
No. A check you request yourself does not count against you.
Does paying off a loan early help?
It can reduce balances and cost. Check the settlement terms first. See settling a loan early.
Will my score reset after a number of years?
Information stays for a set retention period and then drops off. Ask your bureau for details.
Does credit scoring look at my salary?
Most bureau scores do not. Lenders ask for your income separately when they assess affordability.
Can I see how credit scoring changes my number?
A bureau may list the main reasons behind your score. Read them, because they show which habit to work on first.
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