A credit report is a summary of your borrowing behaviour. It shows how much credit you have and which debts you’ve paid off.

Credit reports are generated by credit bureaus, who collect all your credit information from the various credit providers to compile your credit report. There are different credit bureaus in South Africa, and each have a slightly different credit scoring system. You get a credit score based on the info on your credit report. For example, one bureau gives a score out of 600, while another scores borrowers out of 999. It’s almost like a report card at school: The more points you have, the better you’re doing!

When you apply for any type of credit, whether it’s a short-term loan, store card, car or home loan, the credit provider looks at your credit report. It’s your “credit CV” and they use it to decide whether or not they are going to give you credit. It gives credit providers an indication of whether or not you can afford to take on more debt, and what the risk is to them if they give you credit.

While you’d want to avoid bad debt, remember that it’s not necessarily a good thing if you don’t have a credit record at all. If you don’t have a credit record, you can’t enjoy access to finance for things like buying a house or furthering your studies. By taking out a small loan or getting a credit card, you can start building up a credit record to unlock financial assistance that can help you achieve bigger life goals.

Online tools such as this can generate a free credit report for you, and if you’re looking for a small, simple loan to start building a good credit report, click here.