For South African SMEs, securing vital business funding hinges not just on business performance, but often, on the owner’s personal credit score. In South Africa’s dynamic financial landscape, lenders—from traditional banks to agile alternative funders—see your personal credit history as a key indicator of financial discipline and risk.
This article unpacks why your personal credit score is critical, how it’s assessed, and what steps you can take to ensure it’s an asset, not a barrier, to your business funding.
Why Your Personal Credit Score Matters for Business Funding in SA
The line between personal and business finances can often blur for SMEs. Here’s why lenders pay close attention to your personal credit score:
-
- Indicator of Financial Responsibility: Lenders view your personal credit history as a mirror reflecting your financial habits. Responsible personal debt management, timely bill payments, and a healthy credit profile suggest you’ll manage business finances with similar diligence. This is especially true for newer businesses or those lacking an extensive business credit history.
- Personal Guarantees are Common: In South Africa, lenders often require a personal guarantee from the business owner for SME loans. This makes you, as an individual, personally liable if the company defaults. Your personal credit score directly assesses your ability to honour this guarantee.
- Assessing Risk for Unsecured Funding: For many unsecured business loans or lines of credit—where there’s no physical collateral—lenders rely heavily on the owner’s perceived trustworthiness and repayment capacity.
- Limited Business Credit History: Many SMEs, particularly in their early years, lack a substantial business credit history. In these cases, lenders primarily assess the personal credit history of the owner(s) to determine creditworthiness.
How Lenders Assess Your Personal Credit Score in South Africa
Lenders in South Africa rely on information compiled by major credit bureaus. The primary ones are TransUnion and Experian (which now includes data from the former Compuscan).
These bureaus collect data from various sources, including:
-
- Banks and financial institutions (loans, credit cards, overdrafts).
- Retailers (store accounts).
- Telecommunications companies (cell phone contracts).
- Service providers (utility accounts in some cases).
- Public records (judgments, insolvencies, defaults).
From this data, bureaus generate a credit report and a three-digit score, summarising your credit risk. Scoring models vary between bureaus (e.g., TransUnion: 0-999; Experian: 0-800), but principles remain similar.
What Constitutes a “Good” Credit Score in South Africa?
While thresholds can vary, a general guide for personal credit scores in South Africa is:
-
- Below 600: Poor to fair. You may struggle to get approved, or be offered loans at very high interest rates.
- 600 – 699: Fair to good. Likely to be approved, but perhaps not at the most favourable rates.
- 700 – 799: Very good. You are seen as low-risk, typically qualifying for competitive interest rates and higher limits.
- 800+: Excellent. You represent minimal risk and will access the best terms available.
Key Factors That Influence Your Personal Credit Score
Understanding these factors is crucial for managing and improving your score:
-
- Payment History (Most Important): Your track record of making payments on time. Late payments, defaults, or judgments significantly damage your score.
- Amounts Owed: Total debt across accounts. High credit utilisation (using a large percentage of available credit) can negatively impact your score.
- Length of Credit History: How long accounts have been open and active. A longer history with responsible management is generally better.
- New Credit: Applying for multiple new accounts rapidly can indicate higher risk and temporarily lower your score.
- Types of Credit Used: A healthy mix of credit types (e.g., mortgage, car loan, credit card) can be positive, showing varied debt management.
- Public Records: Information like judgments, insolvencies, or debt review orders severely detriment your score and remain on your report for years.
Practical Steps to Improve and Maintain Your Personal Credit Score for Business Funding
A strong personal credit score isn’t built overnight, but consistent effort yields significant improvements:
-
- Pay Bills On Time, Every Time: The single most effective action. Set up debit orders or reminders for all accounts.
- Reduce Your Debt: Prioritise paying down high-interest debt. Aim for low credit utilisation (ideally below 30% of available credit).
- Check Your Credit Report Regularly: You’re entitled to at least one free report annually from each major bureau. Review it for accuracy and dispute errors immediately.
- Avoid Applying for Too Much Credit: Only apply when genuinely needed. Each “hard inquiry” can temporarily impact your score.
- Don’t Close Old Accounts Carelessly: Older accounts contribute to your credit history length. Closing them can negatively affect your score, especially if it’s your oldest account or significantly reduces available credit.
- Address Adverse Listings: If you have a judgment or default, seek advice on clearing it. Paying off the debt and ensuring status updates on your report is crucial.
OneUp’s Approach: Navigating Funding with Your Credit Score
While your personal credit score is undeniably important in the South African context, OneUp’s marketplace approach offers distinct advantages that can help businesses, even if their personal credit score isn’t absolutely perfect:
-
- Holistic Assessment: OneUp’s network of alternative funders doesn’t solely rely on a single credit score. They often employ a more holistic approach, weighing your personal credit alongside critical business metrics like consistent revenue, cash flow, industry performance, and specific assets. This means a slightly lower personal score might not be an automatic deal-breaker if other business fundamentals are strong.
- Matching with Diverse Criteria: OneUp connects you with diverse funders, each with varying risk appetites and lending criteria. This increases your chances of finding a match, even if a traditional bank might have declined you based solely on your personal score.
- Transparency Empowers You: By seeing multiple competitive offers, you gain a clear understanding of the terms available based on your overall profile, including your credit score. This empowers you to make informed decisions or even changes before you choose the offer with the best fit.
- Mitigating the Credit Inquiry Impact. When you shop around for finance, each application typically results in a “hard inquiry” on your credit report. Numerous inquiries within a short period can signal to lenders that you’re desperate for credit or taking on too much debt, potentially leading to a negative impact on your credit score.
This often penalises diligent applicants simply trying to find the best terms. To address this, OneUp is set to launch a groundbreaking feature that addresses this problem by putting control back in your hands. As part of the application process, you’ll have the option to generate your personal credit record directly within the OneUp app and securely share this single, authorised record with the funders you choose to engage.
This will allow multiple potential funders to review your history without each conducting a separate hard inquiry, streamlining the process and helping to mitigate the negative impact on your credit score. Please note, this will be an optional, additional service with a minimal fee, designed to empower you with greater control and transparency.
Ready to see how your credit profile can unlock business funding?
Apply now with OneUp and get competitive offers from multiple funders!
References / Sources:
¹TransUnion South Africa. (Accessed 2025). Understanding Your Credit Score. Backlink: https://www.transunion.co.za/education/credit-score
2 Experian South Africa. (Accessed 2025). Your Credit Report and Score Explained. Backlink: https://www.experian.co.za/consumer/my-free-credit-check-and-your-free-credit-report
3 The South African Reserve Bank (SARB). (Accessed 2025). Guidance on Lending to SMEs.
4 ClearScore ZA. (Accessed 2025). Does a credit enquiry affect your credit score?. Backlink: https://www.clearscore.com/za/learn/credit-score-and-report/does-a-credit-enquiry-affect-your-credit-score