A credit rating is simply a report of how well you handle your money. In school, you work hard and get good grades while in life you get a good credit score when you handle your money well. Having a good credit score enables you to access loans easily. When you get blacklisted on CRB, you get locked out of the borrowing space.
There are 3 credit reference bureaus in Kenya. They are Transunion, Metropol and Credit info. Credit reference bureaus have negative listings as per the law. Financial institutions are mandated to share with them negative information as well as positive information. They are therefore able to build a score on you as an individual.
How to assess your finances
The first thing that you need to do is be brutally honest with yourself. Look at your sources of income and list down what you owe. This works for both businesses and individuals. Look at how much you are earning, spending and what you owe. Once you are honest with these 3, you will be able to allocate and know where what goes where.
There are a number of things you can do. First, you can increase your income, which is easier said than done. Second, you can cut down on your expenditure. When you are honest with yourself and look at the things that you’re spending money on. Are you spending money going out? Do you have more shoes or clothes than you need? Are you going on holiday that you can’t afford? Do you take your kids to a school that you can’t afford? Are you spending sh.1000 on lunch?
If it is a business, look at non-core spending that is not bringing in an income that you can cut. It might be taking a pay cut as a business owner. It might be outsourcing some of the none core activities or even moving to a smaller office. You might as well consider using your home as an office.
After looking at your income and expenditure, you have to start making payments. The trick is to make a payment every month. It doesn’t matter how much of what you owe you pay. Lenders only look at whether the loan is performing or not. You can start by paying even sh.100 every day. This will build a habit and eventually you will find yourself looking for ways to increase your payments.
How to increase your CRB rating
Some of the small aspects taken into consideration when rating some are age and gender. It is known that people in their 40s are at a greater risk compared to people in their 20s. As for gender, men get better credit terms than women. The larger aspects are how good are you at paying. Which means that you have to borrow. You can either get a credit card and make your payments on time or take a loan and make payments on time. So the more times you’re paying consistently, the better your credit score will be.
Consequences of being blacklisted.
If you have been blacklisted on CRB, you will not be able to access financial institution loans. You can however get lending from SACCOs as most of them do not care about CRB listing. You will also miss out on opportunities to work for the government. Mobile Apps which are usually concerned about CRB rating are mostly attached to banking institutions. The Apps which are predatory on their interest rates really don’t care.
Some financial institutions insist on seeing your credit report before they lend you money. Having a good credit rating in Kenya does not get you a better interest rate. You will get the same interest rate as someone who has no credit history.
If you have mobile debt, I’d advise you to get out of it. It should be your priority to get out of the most expensive debts first. Move to your bank loans, then SACCOs and friends and family should be the last people that you pay. When borrowing, look at the spectrum from the other end.