We’ve all heard about credit scores in Kenya. However, not many of us understand what it is or how important it is. In this article, therefore, we will outline what you need to know about credit scores in Kenya.
We will be very particular about why having a good credit score matters and what good credit score matters.
Join us on this journey of understanding Credit scoring in Kenya.
What is a credit score?
In Kenya, credit scores are numbers that reflect your creditworthiness, which is one’s ability to pay up their loans. These numbers are derived from one’s history of financial information. Like how their borrowing and paying up habits have been over the past few months or years.
This history of your financial information is collected by the Credit Reference Bureau (CRB). They will collect all the information on loans issued by financial institutions, including mobile loans, and then create reports.
In Kenya, there are three CRB’s that have been licensed to provide this information:
- CreditInfo CRB
- Transunion CRB
- Metropol CRB
2. What is a good credit score?
In Kenya, a credit score rating begins from 0 – 900. A good credit score is any score above 800, as this reflects, one can pay their loan well.
If your credit score is between 0 – 450, then you have a bad credit score rating, and this may lead to institutions declining to offer you loans.
Above 900 is an excellent credit score in Kenya, and with this score, the sky is the limit to the amount of cheap loan you can access.
There are a variety of factors that credit reference bureaus look at while calculating your credit score. Let’s look at those factors below:
3. Factors that Make up your Credit scores in Kenya
These factors include:
- The amount owed – This is the total amount that you owe lenders. This refers to how your outstanding balances measure up to your total amount of Credit. The lower this is, the higher your credit scores will be.
- Payment history – looks at whether you have been paying your loans on time. Here all types of loans are considered, including Mortgages, mobile loan apps, bankruptcies, liens, wages, and foreclosures.
- New Credit – how many new credits have you applied for recently. You need to have a few or even zero new Credit to have a good credit score.
- Credit Mix – how diverse is your credit accounts. Do you have a retail account, home mortgage, or car loan?
- Length of credit history – what’s the average age of your oldest loan account?
4. Why is it essential that I have a good credit score?
A good credit score in Kenya will enable you to access loans at a lower interest rate than what is already being offered at the market. Whether it be a mortgage or just a car loan, you can access a loan facility while incurring the lowest cost.
5. Good Credit takes time
It is imperative to keep in mind that it will take a while for you to get a credit score of 800. Good credit scores are more like building a reputation, and it takes time. You need to borrow, repay, and then repeat this process severally to be ascertained to be Creditworthy.
Therefore, if you already do not have a credit score, maybe it’s about time to start building your credit portfolio. Remember to spend wisely by always keeping your spending well before the limit amount. As well as making repayments on time.
6. Creditors and lenders share information about you
Creditors have not sworn an oath of secrecy with you. They will share your information with other creditors and lenders. Moreover, they will share your information with the CRB. Any credit move you make is monitored and re-evaluated by our big brother (CRB).
7. How do I Review my credit report?
By law, each year, you can access a free credit report from any of the three Credit Reference Bureus already mentioned earlier above.
Once you receive this information, be sure to check for errors and discrepancies to ensure that you are on the right path to creditworthiness.