We have all found ourselves in that tight financial spot at one point or another, or at least know someone who has. It can be an uncomfortable and annoyingly desperate situation. If you’re ever so lucky, you can find someone to foot your bill. Some are able to get quick loans to pull them through and others, unfortunately, do get stuck in that situation for longer than they would have wanted to – There are levels to this.

The COVID -19 pandemic has landed many people in such situations. With businesses tumbling, job cuts, pay cuts, among other economic slowdowns, financial problems have affected several people to various degrees.

Entrepreneurship has been a saving grace that has helped some people keep their income flowing and curb the pangs of unemployment. The KCB Foundation has spent at least Sh16.7 billion on funding and developing youth and women entrepreneurs.

Its Niko Waks program, which targets people within the small and micro enterprises in Kenya, has helped train entrepreneurs in three major economic sectors. These include agriculture - Hydroponic Farming, construction, and manufacturing. You can tender your application for the programme here. More than 1.5 million youth enterprise opportunities have been developed through the Young Africa Works programme with Mastercard Foundation.

The firm has also encouraged people to explore self-employment and other entrepreneurial ventures through its 2jiajiri program. Over Sh2.6 billion has been invested in skilling the youth through the program. 2jiajiri also addresses the problem of youth and unemployment by creating jobs for the youth through skill development and vocational scholarships.

Sometimes, however, you just need a loan to give you that extra push, even towards business. Loans can help bring in much needed capital to set up a business. KCB has given more than Sh115 billion in business loans.

Loans can also come through during financial rainy days. It’s easier when you don’t need to fill pages of forms and go back and forth with the bank to access the money. Mobile apps such as KCB Bank’s Vooma can be helpful in such situations. Vooma is a financial mobile app that allows customers to access loans, send money to other VOOMA users, other mobile wallets like M-PESA and T-Kash and bank accounts.

While these options may be helpful, they too can be dangerous if not well utilized. A loan can help when you are in a fix but if you don’t manage it well, it can fix you at the CRB.

A credit reference bureau (CRB) is a company that collects, manages and distributes information on loans issued by lending institutions such as banks and micro-finances.

Using 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 registered as a good credit score or you can be blacklisted.

Credit information has become very critical as all lenders consider it before they give you a loan.

A good credit score 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.

A negative listing could mean that you access credit at a much higher rate in future. You will be on the blacklist for seven years. However, it is possible to clear your name before this time lapses.

Here are some tips on how to maintain a good credit score:

1. Manage your debt

The best way to ensure you maintain an excellent credit score is by improving your borrowing habits. Loans, credit card balances and lines of credit all affect your level of debt. Having too much debt can cost you points on your credit score. The lower your debt, the easier it will be to maintain a good credit score.

2. Pay your loans on time

To stay on track with creditors and preserve a credit score, make certain every loan’s required payments are made on time.

If you currently have debt of any kind, taking steps to eliminate it will gradually improve your credit score.

Don’t borrow a loan to pay off another, stop using your cards, make a budget, and start paying down your high-interest cards first while maintaining minimum payments on all the other debts.

3. Pay more than the minimum

Always try to settle your debt in full and if you can’t you should pay off at least the minimum required.

Paying just the minimum is a terrible way to pay off debts and it could stretch out even small debts for years, which means more interest fees.

However, to avoid having late or missed payments on your record, be sure to pay at least the minimum.   

4. Keep track of your credit score

Just because you do everything right with your credit doesn’t mean everyone else will. Errors could end up on your credit report and affect your score. Identity theft and credit card fraud can lead to inaccurate information on your credit report. 

Check your credit report regularly to detect and correct any and maintain a good credit score.

5. Live within your means

Learn to live within your credit means and don’t exceed your limit. Don’t borrow more than you can handle to pay off while still spending within comfort – you shouldn’t stretch yourself too thin. A good budget and savings plan can help with this. You can also get a financial advisor to guide you through this.

Credit scores are an important part of your financial health. You want good credit scores because they can unlock many savings and benefits, including access to loans and credit cards with the most favorable terms.

CRBs in Kenya are Metropol, Creditinfo and Credit Reference Bureau Africa (CRB Africa), also known as Transunion Africa.

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