5 reasons why you should check your credit report frequently!

The year 2014 began on a high note for Kenya’s Credit Information Sharing (CIS) mechanism, with the publication of the Credit Reference Bureau (CRB) Regulations 2013. The new Regulations opened a new chapter in the CIS mechanism by among others, allowing both commercial banks and microfinance banks (previously known as Deposit-Taking Microfinance Institutions - DTMs) to share information on their good and bad borrowers, away from the traditional approach of sharing information on defaulters only amongst commercial banks.
Other provisions included the reduction of data retention rules from seven to five years, issuance of pre-llisting notices to borrowers before they are listed in the case of default(s) in repayments, the set-up of agency services by the CRBs and a host of other consumer protection rules. (Read: CRB Regulations 2013: Responding to Needs of Borrowers). The Regulations became effective from February 2014 and since then, commercial and microfinance banks have successfully shared full-file information for eight months through the licensed CRB’s.
Therefore, this underscores the need for borrowers (individuals or business) to routinely check their credit reports for the reasons discussed below:
  • Know your credit score and use it: “information is power,” so goes a popular adage. It is thus crucial for you to access your credit report so as to establish your current credit reputation. Knowing your standing enables you to make informed credit-related decisions in relation to your personal/business development plans. Also, this enables you to actively manage your borrowing and repayment behavior with an intention of achieving/maintaining an attractive borrower profile.
  • Negotiating for preferential credit terms: closely related to the first reason above is arming yourself with information that you can use to negotiate for preferential credit terms. A credit report has a score which summarizes a borrower’s credit behavior. A good borrower (typically characterized by consistent and timely repayments) will have a higher score and vice versa. Therefore, a good borrower who routinely checks his report can approach a lender and negotiate for better loan terms like reduced reliance on tangible collateral, friendly repayment schedules, lower interest rates and faster turn-around-times in loan processing times, among others.
  • Ensure the correctness of your information: frequently accessing your report gives you an opportunity to review the information contained therein and ensure correctness. While doing this, pay attention to the correctness of your personal details (name, contacts, ID number) as well as the summary of a your loan accounts and their status. This includes loans a borrower’s loans that are being repaid satisfactorily as well as those whose repayment status is unsatisfactory or in default.
  • Identify any remedy any errors your information: by checking your report to verify the correctness the information, you can also detect any errors in the information before they disadvantage you should in future loan-related matters. Early detection of such errors shields you from being affected negatively by lenders (and other institutions) when they check your credit report to make lending or hiring decisions, among others. CIS Kenya is finalizing on setting up a CIS Mediation Centre for resolving CIS-related disputes that arise between borrowers, lenders and the CRBs. The mediation center is set for launch within the last quarter of 2014.
  • Detection of loan application fraud: in some cases, identity thieves can ‘seize’ you identity and use it to take loans under your name. If the loan is granted, the lender holds you accountable for the loan since your identity (and related documents) were used in making the fraudulent application. However, by routinely checking your report you can know and quickly report suspicious loan information, thus absolving yourself from such fraudulent loan applications.
In conclusion, make it a habit to frequently check your credit report with either of the licensed CRBs (Metropol or Transunion Africa). Remember, you are entitled to ONE FREE CREDIT REPORT per year from either bureau and thereafter subsequent reports can be obtained at a minimal fee. The CRBs require basic documents (original ID and KRA PIN Certificate) to verify your identity before issuing you with your credit report. So go ye and check your report today.
Tags:
Credit Report, Data accuracy, credit reference bureau, CRB, Metropol CRB, Credit Information Sharing, CIS, Transunion Africa CRB, CRB Regulations 2013.