Why you should keep your credit score positive

Loans matter

The Swahili saying goes, ‘dawa ya deni ni kulipa’. Loosely translated, ‘ you treat a debt, by paying it.’ Debts or loans are a necessary evil. Think of debts as the a way of elastically stretching your bow backwards so that you can release your spear to achieve your aim ( if you are hunting that is ). Loans are a critical aspect of financial growth , whether personal or business-wise but only if they are used wisely to achieve a positive credit score.

Credit Score

A good loan is one that you can easily repay without much struggle. That is because , the better you are at repaying your loan, the better you shall be at getting higher loan limits with lower interest in future. This is also called building a positive credit score.

CRB

Financial institutions closely monitor your habits of borrowing and repaying loans and they share these information with each other. In Kenya , they do this through the Credit Reference Bureaus ( CRBs). The moment you get a loan from a formal financial institution, they share these information with CRB.

Similarly, when you start servicing this loan, this information is also constantly shared with CRB. As a result, should you seek a loan in future, even a different institution , they can easily fetch your data from CRB and see your credit score. This is basically your financial reliability.

+ve Credit Score

Responsible borrower

A positive credit score indicates many things. It shows firstly that you a responsible borrower. You borrow what you need and what you are sure or certain or repaying. This is a good attribute because it means that in future, you are likely to repeat the same good manners.

Stable income

Secondly, regular repayment of loans is an indication that you have a stable means of earning income. This too is paramount. Lenders offer you a onetime amount at ago and expect to be repaid in instalments thereafter. Having regular income is sufficient proof that you can afford to keep paying the loan after you receive it.

Honest person

Thirdly, a positive credit score is also an indication that you are generally an honest person. People who take care of their obligations have a positive character trait of honesty. A lender prefers to deal with honest people because they are highly unlikely to run away with the lender’s money.

In conclusion

Even in cases where some lenders clearly indicate that your CRB score doesn’t matter, they still check this out. Case in point is Mwananchi Credit Limited. As logbook loan provider, they have a much higher risk appetite and hence may lend to you even if you are negatively listed on CRB. However, you shall find that those who are not listed get much lower rates ( 1.5%) for their loans than their listed counterparts ( Upto 3.5%).

So , yes, when it comes to loans, the best treatment is to actually pay them and in the process, improve your credit score !