5 Tips for Maintaining a good Credit Score

Borrowers with high credit scores can easily negotiate favourable loan term.  In Kenya, borrowers are entitled to one free credit each year and any other reports requested within the year will be charged.  If you plan on securing a loan in the future it is important that you work on maintaining a good credit score.

The Banking Act, through the Credit Reference Bureau (CRB) Regulations, requires that all Kenyan Banks, savings and credits Cooperative and microfinance institutions submit and periodically update their customer’s credit information. These financial institutions are required to provide this information to all licensed CRBs on a monthly basis.

What is the recommended credit score?

As a borrower, it is important that you familiarize yourself with credit rating.  It is through this that you can improve your chances of acquiring favourable business and personal funding.  With a high credit score, you are guaranteed of getting higher and more workable loans.

The credit scores range between 100 and 900. If your score is below 400, then your chances of getting a loan are minimal. Such a score means that one has a history of defaulting on payments.

A score of 401 to 600 means that the borrower has not defaulted on any payments but they have lower chances of getting a sufficient loan. The borrower, in this case, is considered to be high risk.

A score of 700 and above will, however, get you a ticket to better loans. With such a score, you qualify for a loan of your choice. The loans are also offered at a friendly term.

Borrowers in Kenya are entitled tone free credit report every year. Any other report requested within the course of the years will be offered at a fee of Kshs.500.

Maintaining a good Credit Score is therefore important for anyone wishing to secure a loan. Maintain a high score and get a high loan with friendly interests.

List of Licensed Credit Reference Bureaus in Kenya

Currently, there are only three licensed credit reference bureaus in Kenya:

  • Metropol
  • Transunion
  • Creditinfo

Metropol

To register with Metropol, you can visit their site metropol.co.ke. You can alternatively register by dialling #433# using your mobile phone. The service is only applicable to Safaricom customers. A registration fee of Kshs.100 is required. You will then receive a code via SMS which you will use to access your credit report on their site.

Transunion

Register through their website crbafrica.com or transunionafrica.com. Alternatively, send your name to 21272 at a cost of Kshs.50.

Creditinfo

To register, visit their website creditinfo.co.ke and you will receive your credit information via email.

Benefits of Maintaining a Good Credit Score

You can survive with a bad credit score, but believe me, it is not always easy and most definitely it will cost you. Maintaining a good credit score will help you save money and make your life easier.

If you are in short of reasons why maintaining a good credit score is important, here are some benefits to having a good score:

  • low interest rated on loans and credit cards
  • better chance of loan approvals
  • more negotiating power
  • higher loan limits
  • better car insurance rates
  • cheaper utility services
  • effortless leasing of housing

I have just provided you with a highlight of the top benefits of a good credit score.  To find out more on these benefits read these benefits of a good credit score.

The Top tips for maintaining a good credit score

Just to highlight some of the top tips:

  • Pay your bills on time
  • Get copies of your credit report
  • Reduce existing debts
  • Avoid many loan applications
  • Avoid credit cards

1. Pay Bills on Time

If you have loans and/or monthly repayments, make sure that you pay them on time.  The first thing that a lender will look at before they can give you a loan is your payment history.  If you have a history of defaults or poor repayments, your score will be on low and you may not qualify for a loan.

2. Get Copies of Your Credit Report

Make sure that you know the credit bureau your bank is registered with and get your credit report.  It ensures that you are familiar with the terms that your lender will use.  It also will help you to identify mistaken entries that could damage your credit score.

3. Reduce Existing Debts

If you have a loan, make a point of reducing it.  This will positively reflect on your credit report and is an indication that you are a good borrower and payer. Additionally, this may help you get lower interests.

4. Avoid Many Loan Applications

Your credit report will indicate any other loan applications you have applied.  Applying for multiple loans within a short period will give the impression that you are a risky borrower. This reduces your chances of getting a loan.

5. Avoid Credit Cards

Try as much as possible to settle your debts directly. The use of credit cards will only leave you with high-interest rates in the future. It is important to note that 30% of your credit score depends on the amount you owe.

Maintaining a good credit score is paramount to loan applications. A good credit score allows you to have access to better loans and credit services at a lower interest rate. It also offers you other advantages such as low rates on car insurance,  and you also get a higher chance of loan approvals.