It is possible to improve your credit rating thus your record is not ruined forever.
CRB is an abbreviation that stands for Credit Reference Bureau. This is a company that collects information on loans issued by lending institutions such as banks and micro-finances.
From this information, they create reports of each borrower which contains data on all the loans (past and present) that they have ever received and the repayment pattern. Your status can then be listed as good or blacklisted.
Good shows that you have been compliant in repaying your loans whereas blacklist shows that you have defaulted on some of your loans or you have not paid as per the agreement you made with the lenders. This information has become very critical as all lenders consider it before they give you a loan.
Most employers also seek it out before they hire a new employee. More so, as an entrepreneur if you were to bid for a government tender then your CRB status would be one of the things they would check.
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The above reasons show you just how important it is to know your CRB status and work on improving it.
Fortunately, this is not a hard task. Having failed to pay your loans in time, there is a high likelihood that you have been listed on CRB which will flag you as a defaulter.
To access your credit report you can contact one of the CRBs as we have three in Kenya namely Metropol Corporation, TransUnion and Creditinfo. Contact can be made by visiting one of the offices, through their websites and on mobile platforms. It can be as easy as sending a SMS to a certain USSD code and following a few instructions to get the report.
In fact, legally, a borrower is entitled one free check per year thus you may not have to incur costs for your first check.
Consequently, in the report they will include the lender who blacklisted you which gives you an opportunity to contact the lender with whom you can come up with a different agreement on how you will repay the loan which can be done either in full or at a pace you are most comfortable with.
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Once the debt is cleared, they will communicate this to the CRB Company who will remove your name from the list and issue you a clearance certificate upon paying a Sh2,200 processing fees.
Consequently, it is possible to improve your credit rating thus your record is not ruined forever. First, you will need to understand some of the criteria used to determine your rating. For example, the Metropol CRB check for payment performance index (PPI), metro score and the Q score.
The PPI measures how compliant you are at repaying your loans within the agreed time. Therefore, it will indicate the number of late payments and this measure will be used to show your payment habits. In this case to get a high score on this metric you should try to be as prompt as possible at paying loans.
Sometimes if you can, you do not have to wait for the deadline to pay. On the other hand, the metro score measures your likelihood of defaulting so it will look at the aging of your outstanding balance to see how long the loans have been outstanding. For this you will have to be keen on paying your loans in full without fail as that will land you again on the blacklist.
Lastly, for the Q-score it measures the quality of the data you provide to lenders by metrics such as, is it complete? Is it relevant and is it consistent? For you this means you need to be as honest as possible when you give information as this will ensure you seem honest and consistent.
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Also, when possible give all the information that is required so that lenders can trust you with their funds. Therefore, ensuring all the above metrics are catered for you can expect a good credit rating and a wealth of options when you need to borrow funds from whichever lender.
However, when all is said and done, for all these to be possible you need to be smarter about the dos and don’ts of borrowing money. As per your narration, you mention that you borrowed the two loans to supplement your income.
Firstly, when you find yourself borrowing to pay your day to day bills and expenses, this is a sign of either improper management of funds or a gap in your income earning ability. Either way, this is a call for help and needs to be resolved immediately to avoid falling into an abyss of loans you cannot afford to pay.
Secondly, do not fall prey to bad lenders, therefore, with a multitude of lenders, try to find one with the best terms such as low interest rates and a longer payment period as these terms will make the loan more affordable and it will give you more time to repay the loan to avoid delays.
In conclusion, your credit rating is very important as it can affect your business, employment and ability to borrow loans. Also, being listed in CRB is a bad thing as it puts a mark on your credit score. However, all is not lost when you are listed as there are ways to get yourself cleared and redeem your credit score.
Most importantly, the best way to ensure you maintain an excellent credit score is by improving your borrowing habits.
Dr Pesa is Ann Nyakina, an Alternative Investments Assistant at Cytonn Investments.