Every Kenyan will now be mandated to get a credit score from Credit Reference Bureaus (CRBs) as a negotiating tool in all banks, microfinance institutions and savings and credit cooperative societies (SACCOs), and other lending institutions.
The credit score mechanism has been in existence, yet institutions use it to varying degrees, to accurately gauge customers’ creditworthiness during loan scoring.
The credit score mechanism is underpinned by the CRB Regulations, 2020.
“Each institution shall consider a customer’s credit score in appraising a customer’s credit application and in the pricing of a credit facility,” states CRB Regulations, 2020.
With Metropol CRB’s Credit Score (Metro Score), one is awarded marks between 200-900. Any marks below 400 mean your rating is low because you are a defaulter. Rating near 800-900 means you have a high rating. The score is used to assess a borrower’s creditworthiness.
In his inaugural speech on September 13, 2022, H.E, the President, William Ruto – backed the assigning of credit scores to borrowers in a push to allow CRBs to ensure every Kenyan is not denied credit.
President Ruto’s call added impetus to the Credit Information Sharing (CIS) mechanism by CRBs for full-file information sharing of a customer’s credit history.
The 2020 Regulations provide that CRBs must develop a credit score for each borrower whose credit information has been submitted and that the credit score must be computed using details and, methods prescribed by the Central Bank of Kenya (CBK).
What Are the Benefits of CRB Credit Score?
You can always survive with bad credit, but it’s not always easy and in most cases an expensive affair, given that the cost of obtaining money will always be higher compared to those with good Credit scores.
Under a credit scoring mechanism, borrowers are assigned specific scores based on their creditworthiness with a higher score indicative of higher chances for the customer to meet his or her credit payments.
As the President champions the credit scoring mechanism, there are a number of benefits for borrowers.
Better chance for loan approval
Having an excellent credit score doesn’t guarantee approval, because lenders still consider other factors such as your income and debt. However, a good credit score increases your chances of being approved for new credit. In other words, you can apply for a loan with confidence.
Lower interest Rates
A good credit score gives you leverage to negotiate a lower interest rate on a new loan. If you need more bargaining power, you can take advantage of your credit score.
Eligibility for Higher Credit Limits
Your borrowing capacity is based on your income and your credit score. One of the benefits of having a good credit score is that banks are willing to let you borrow more money because you’ve demonstrated that you pay back what you borrow on time.
In the US, the credit score number ranges from 300 to 850 and is based on credit history including the number of open accounts, total levels of debt and repayment history.