Many Kenyans have started taking various forms of credit to finance various aspects of their lives. Any form of credit provides an immediate financial solution. Credit can be gotten in the form of credit cards and loans. Whatever the reason for needing the credit, the golden rule applies that it must be paid back with the agreed upon terms and conditions.
Whatever the reason for needing the credit, the golden rule applies that it must be paid back with the agreed upon terms and conditions. One of the biggest challenges most people have is in paying back that credit within the agreed upon terms and conditions.
Most lenders agree with you on a particular period within which you must pay off your credit. If you fail to pay the amount you owe within the agreed period, you get labeled as a defaulter.
All lenders are obligated to report defaulters to the Credit Reference Bureau in Kenya. After a defaulter is reported they get blacklisted by the Credit Reference Bureau. This means that the defaulter will be banned from accessing any form of credit from a formal source, for a period of 5 years unless they clear their outstanding balance before hand. To avoid such a situation it is imperative you check your credit status regularly.
This means that the defaulter will be banned from accessing any form of credit from a formal source, for a period of 5 years unless they clear their outstanding balance. To avoid such a situation it is imperative you make a habit of constantly checking your credit status regularly.
What is a Credit Reference Bureau?
A Credit Reference Bureau (CRB) is a company that collects credit information about borrowers from a variety of sources and provides it to lenders for various purposes.
How Does the Credit Reference Bureau Work?
The information collected by the CRBs is crucial to banks, microfinance institutions and SACCOs (Savings and Credit co-operative societies) because it is used to assess the borrowers’ ability to repay loans.
So, when a loan applicant approaches a lender, the lender submits the name and identification number of the customer to the CRB. The CRB will then ascertain if the applicant is listed on their database for whatever reason.
Thereafter, a credit report of the loan applicant will then be forwarded to the bank. If the applicant is listed in the CRB, their loan application will be declined. The information can also be availed to the customer if they desire.
What is a Credit Report?
This is a report consisting of a person’s credit history and is prepared by the CRB. A CRB report usually contains the persons:
- Identification details
- Employment details
- Credit performance
To obtain your credit report from a CRB, you are required to attach a copy of your ID to a credit request form. The form should be filled with the correct details. In addition, you must present your original ID for authenticity purposes. The credit request is also available in any CRBs website.
What is a COC (Certificate of clearance)?
A certificate of clearance is a confirmation that a person does not have any outstanding arrears with a lender. One should consider getting their COC because:
- It will ease your mind when it comes to your credit history
- It has become a requirement by many employers during recruitment
However, it is important to note that the certificate is only valid at the time of issue due to the daily update of information. The updates could immediately change the customer’s information. To get the certificate you must pay KES. 2200 through the CRB bank account or via M-Pesa.
In case one has a non-performing account and you clear your outstanding debt, it takes about forty-eight (48) Hours to clear your name from the CRBs database.
Licensed CRBs in Kenya
The CBK (Central Bank of Kenya) has licensed the following Credit Reference Bureaus to operate in Kenya. They are:
- Creditinfo Credit Reference Bureau Limited
- Credit Reference Bureau Africa Limited t/a TransUnion
- Metropol Credit Reference Bureau Limited
If you are planning on taking any form of credit, ensure you do not have unpaid debts that are not being serviced. The municipal councils in the country also forward details of those who land rates or rent arrears. The CRBs are poised to become the reliable way of rating Kenyans on loans.
In some cases, a good credit score is even considered as collateral especially for small businesses and individual borrowers. The CRB does help us be more responsible and enables the lenders to invest in serious consumers and thus avoid future problems.