Know your credit score before applying for car finance

12 September 2019

If your credit rating is low, you might be denied financing for the shiny new car you want. Here’s why you should know your credit rating before applying for finance, and what you can do to increase a low score

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You’ve been for the test drive, you have your heart set on that new car, and you’ve negotiated a price that you can comfortably afford. You have enough money to put down a deposit, and you earn a sufficient sum to afford the anticipated monthly repayments. You fill in your finance paperwork and expect all will turn out well. 

You wait for that call, only to be told that your application has been denied because of your poor credit rating, which you might not have known about in the first place. And so you’re left without a new set of wheels, and wondering what you could have done differently to know your credit score in the first place, and improve it.


Your credit bureau score or credit score shows you, by way of a number, the strengths and weaknesses of the information in your credit report, and how your credit standing compares with other consumers, according to TransUnion Credit Bureau.

They explain that the information in your credit report is used by the majority of credit and service providers, and is calculated using a formula that evaluates how well or badly you pay your bills, how much debt you carry and how all of that stacks up against other borrowers. Essentially, it tells you in a single number what your credit report says about your management of existing credit.

If you want to apply for credit to buy a car, for example, your credit score can serve as a guide. A high score is favourable to financial providers, while a low score implies that you have a negative credit rating and either your request for finance will be denied, or your interest rate will be even higher.

Credit providers use different scoring methods but the score range is usually between 330 and 830. Above 750 is an excellent score.


By law, everyone in South Africa is entitled to one free credit report a year. There are several credit bureaus in South Africa who are obliged to give you your score when you request it the first time. If you ask again that year, they can charge you for it. It’s fairly quick and easy to apply for your credit rating.

Here are some of the companies offer credit score checks in South Africa:


  • • Pay your bills on time – try set up debit orders to pay for your utility bills
  • • Only apply for credit when you need it. Every time you apply for credit, a credit check is done on your, which lowers your score. 
  • • Regularly review your credit report – you can check for fraud, and see if there are any mistakes that could be negatively affecting your score.
  • • Build your score by using your credit card often and spending small amounts, and paying them off each month.
  • • Pay off debt. Compile a monthly budget that includes paying off creditors each month. Start with the things that are costing you the most interest. Ensure you always pay the minimum instalment. 
  • • Go for debt counselling if you’re overwhelmed and not sure where to start cutting your debts, A debt collector can approach creditors on your behalf to make plans to pay off your debts while arranging your living expenses.

Disclaimer

This article is intended to be used and must be used for informational purposes only. We do not make any warranties about the completeness, reliability and accuracy of this information. Any action you take upon the information in this article is strictly at your own risk. We will not be liable for any losses and/or damages in connection with the use of the information contained in this article.

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