Regular checks on your credit status is vital

When Martin Mwanje was ready to start his construction project in Kakamega last year, he applied for a loan. He believed that his bank would approve the financing.

But when no response came about his loan application, he contacted his bank only to be told that his records from a credit reference bureau said he owed another bank Sh1,700 — dues that were posted in 2012.

“I was very annoyed. I couldn’t understand how I had owed the bank for over a year,” he told Money.

According to credit reference bureau, Metropol Corporation Ltd, managing director Sam Omukoko, many Kenyans do not know their credit rating. They only discover it when they are denied a loan or when it is demanded of them say during job interviews.

“I think we need to know our credit standing which the law allows everyone to access it for free once every year,” said Mr Omukoko during the launch of Credit Information Sharing Alternative Dispute Resolution (ADR) Centre at the Kenya School of Monetary Studies recently.

Negative credit records

Currently, Metropol Corporation has over 750,000 individuals listed with negative credit records. To help borrowers know their status, the firm has turned to a mobile platform, Crystolbol, where one can establish his/her credit rating via the handset.

By dialing up *433#, Kenyans with national identity cards can establish their credit status. After registering, one can get a full report, whose link is sent to their handsets and can also be downloaded online.

Started in 2012, the initiative was rolled out early this year to help eliminate complaints from Kenyans, some of whom instruct their lawyers to proceed with legal redress after they have been backlisted without their knowledge.

Banks normally disclose credit data to the reference bureaus by 10th of every month. The information has since been updated to include even loans that are being serviced well. Borrowers have a credit rating of between 200 and 900.

A score below 400 shows traces of default while above 700 shows good rating and implies that one can access more funding.

Lenders put emphasis on credit rating and rely on it to make decisions in a market where attention is shifting from the traditional collateral-based lending to unsecured loans.

Contrary to the believe that only banks and mainstream lenders blacklist defaulters, your credit history can now come from Saccos, micro-lenders, utility firms such as Kenya Power, water distributors as well as the Higher Education Loans Board.

According to credit reference bureau regulations, 2013, negative information also include receiverships, bankruptcies and liquidations; misapplication of borrowed funds, dishonour of cheques meant for settlement of credits in favour of institutions, proven cases of fraud, proven cases of cheque kiting, false declarations and false statements among others.

“Credit bureaus now get data from microfinanciers including money borrowed from mobile service providers. This is good for the lending environment in the country since no one will be afraid to lend as long as your default eventually works against you,” adds Mr Omukoko.

It is the increasing number of cases that has seen many Kenyans visit credit reference bureaus and courts of law that has informed the creation of the credit information sharing alternative dispute resolution centre.

Launching the centre, Mr Justice Fred Ochieng’, who is a presiding judge, commercial and admiralty division, urged Kenyans to lodge their disputes at the centre.

Dispute resolution

“We will highly discourage such cases from being brought to court if the alternative dispute resolution has not been approached first. This is certainly the most affordable and the fastest way of resolving these disputes. In a court, there is always a winner and a loser. The alternative dispute resolution will strive to see a win-win end of these disputes,’’ said Mr Justice Ochieng’.

Banks commit borrowers to authorise their details to be forwarded to credit bureaus in loan offer documents.

The law, however, requires that customers be informed 30 days before being blacklisted.

“A credit information provider furnishing negative information to a bureau regarding credit extended to a customer or arising from a product or service rendered to a customer shall, in writing or through electronic means, issue to the customer a notice of intention to submit the negative information within 30 days,” section 25 (1) of the credit reference bureau regulations, 2013, notes.

There are only two credit reference bureaus in Kenya and both are located in Nairobi; Metropol Corporation Limited at Shelter Afrique Centre in Upper Hill and Credit Reference Bureau Africa headquartered at Prosperity House, in Westlands.