Applying for a home loan is one of the biggest financial steps you can take. Whether you’re a first-time buyer or a property investor, your credit score plays a critical role in whether or not you’ll be approved. In South Africa, financial institutions assess your creditworthiness to determine your ability to repay a home loan. A higher score not only increases your chances of approval but may also get you better interest rates.This guide explains how your home loan credit score influences the loan process, what the minimum required scores are, and how you can improve your credit standing before applying.
What Is a Credit Score?
A credit score is a three-digit number that reflects your creditworthiness based on your borrowing and repayment history. In South Africa, the score typically ranges from 300 to 850, and it is compiled by major credit bureaus like TransUnion, Experian, and Compuscan.
The higher the score, the lower the risk you pose to a lender.
Credit Score Ranges in South Africa
| Score Range | Rating | Interpretation |
| 800 – 850 | Excellent | Very low risk; qualifies for best rates |
| 740 – 799 | Very Good | Low risk; high chance of approval |
| 670 – 739 | Good | Moderate risk; may need additional checks |
| 580 – 669 | Fair | Higher risk; may require a higher deposit |
| 300 – 579 | Poor | High risk; loan application likely declined |
Minimum Credit Score Required for a Home Loan
There is no fixed national score that guarantees home loan approval, but most South African banks look for a minimum score of around 600 to 640. If your score falls below this range, you may still qualify, but with stricter conditions:
- Higher interest rates
- Larger deposit requirements
- More documentation
- Possible need for a guarantor or co-applicant
Why Does Credit Score Matter for Home Loans?
Lenders use your credit score to evaluate how responsible you’ve been with credit in the past. This directly impacts three areas:
1. Loan Approval
If your credit score is strong, your application is more likely to be approved. A low score can result in a decline or request for a co-signer.
2. Interest Rates
Applicants with high credit scores are often offered lower interest rates, which can reduce the total cost of the loan significantly over 20–30 years.
3. Loan Terms
Better credit scores lead to more favorable loan conditions — such as flexible repayment plans and reduced admin fees.
What Affects Your Credit Score?
Several financial behaviors influence your score. Here’s what credit bureaus take into account:
1. Payment History
Missed or late payments on credit cards, loans, or store accounts negatively affect your score.
2. Credit Utilization
Using too much of your available credit (e.g., maxing out a credit card) can lower your score. Ideally, use less than 30% of your total credit limit.
3. Length of Credit History
Long-standing accounts in good standing help boost your score, showing that you can manage credit over time.
4. New Credit Applications
Multiple recent applications can suggest financial distress and may lower your score.
5. Account Variety
A mix of credit types — such as vehicle finance, credit cards, and personal loans — shows you can manage different financial responsibilities.
How to Check Your Credit Score in South Africa
You are entitled to one free credit report per year from each registered credit bureau. You can obtain your score from:
- TransUnion
- Experian
- XDS
- Compuscan
Some banks also offer free credit score tools on their apps or internet banking platforms.
How Lenders Use Credit Scores in Home Loan Evaluation
When applying for a home loan, lenders use your credit score alongside other metrics such as:
- Gross monthly income
- Debt-to-income ratio
- Employment status
- Deposit availability
- Affordability score (based on expenses)
Each bank has internal credit scoring models that may weigh certain factors differently, but the credit score remains one of the core decision-making tools.
What to Do If Your Credit Score Is Low
Having a low credit score doesn’t mean you can’t get a home loan, but you’ll need to make some adjustments or take preparatory steps.
1. Pay Off Existing Debt
Clear outstanding balances and avoid taking on new credit just before applying for a home loan.
2. Settle Defaults or Judgments
If your report shows legal action or unpaid debts, settle them and request that the bureau update your profile.
3. Avoid Multiple Loan Applications
Don’t apply with several banks at once, as this could negatively impact your score. Consider using a bond originator who applies on your behalf.
4. Wait and Rebuild
If your score is very low, spend a few months improving it before applying. A better score will increase your approval chances and save you money long-term.
Credit Score vs Affordability: What Matters More?
While your credit score is essential, lenders also consider how much of a loan you can afford. A high score with a low income might still result in a low loan offer.
To improve overall eligibility, ensure your affordability metrics are solid:
- Keep debt obligations low
- Demonstrate consistent income
- Provide proof of reduced living expenses
- Offer a larger deposit, if possible
Together, creditworthiness and affordability determine the size and structure of the loan you qualify for.
Can You Get a Home Loan with No Credit History?
If you’ve never used credit before, your score might be non-existent or neutral. In such cases:
- Banks may ask for a co-applicant with a credit history
- You might be required to make a larger deposit
- Alternative lenders or housing finance companies like SA Home Loans may consider your case
Building a credit history before applying can increase your chances of getting favorable terms.
Improving Your Credit Score Before Applying
Here are key steps to follow if you want to boost your credit profile ahead of a home loan application:
- Pay bills on time every month
- Avoid using more than 30% of your credit limits
- Don’t close old credit accounts unnecessarily
- Check your credit report for errors and dispute inaccuracies
- Keep new credit applications to a minimum
Consistency is key. Credit improvements typically reflect within three to six months, depending on your actions.
