Most members of the public believe that Credit Reference Bureaus (CRBs) are institutions that blacklist and prevent them from accessing loans.
For starters, CRBs are non-State entities regulated by the Central Bank. They were introduced in 2010 to collect and share information on borrowers, helping lenders make well-informed decisions before issuing a loan.
The overall reason for this is to help the lenders mitigate risk in lending. There are currently three registered CRBs in Kenya - Transunion, Credit info, and Metropol.
These three institutions issue the public with credit reports and CRB clearance certificates, allowing authorised users to view how different loan facilities perform.
CRBs do not have the authority to blacklist borrowers. Blacklisting infers that these institutions only collect and share negative borrower information. This is not true as the law requires that these institutions collect and share both positive and negative information with authorised institutions to create a holistic and accurate picture of how a loan is performing.
But can CRBs hold negative credit information for eternity? They are required to hold negative credit information for only five years. This means that if a borrower has a non-performing loan but they are unable to pay the loan, then the negative information will only be held for five years.
CRBs are authorised to issue credit reports to authorised users. Every Kenyan above 18 years is entitled to one free credit report annually. The credit report shows loans taken up by borrowers and how they’re performing, highlighting their repayment and default history. When a borrower pays on time, this results in a positive credit rating. Is it mandatory for banks to share credit information?
Yes, banks are required to share both positive and negative information with CRBs.
However, other lenders such as Saccos require written consent before they can list or share a borrower’s lending information. This consent is usually captured during the loan application process.