Skip to main content

How To Get A Good Credit Score To Avoid High Interest Loans

If you are fond of playing tricks with your electricity or water bills, think again. A bad utility payment record might just deny you that coveted car or housing loan. Credit scoring is set to play a big role in how banks and other financial institution determine who give credit and how much and what rate of interest to charge depending on your financial history.

Simply, a credit score is a number representing the credit-worthiness of a person or the likelihood that person will pay his or her debts. It has shown to be very predictive of risk, made credit more widely available consumers and lowered the cost of providing credit.
Credit rating agencies such as Credit Reference Bureau (Africa) use such things as utility bills and financial expenditure to map your financial strength. They collect individual credit transactions from banks, finance companies, merchants, credit card companies, and other credit suppliers such as water companies, electricity suppliers, hire purchase companies and Sacco among others.

Credit histories present all activities concerning products or services one consumes on credit. It shows the amount of credit you owe, type of credit, repayment period and how one pays it. whether steadily, late or default.

Some people believe the use of their credit history will put them on a blacklist, denying them credit should they try to access any from banks and other institution. This may not be the case, a good credit score is a tool you can use to negotiate a lower interest rate on loans, among other advantages. Here are ways to ensure a good credit score:

Building a Credit Profile

The first step in getting a credit score is to get a credit profile, which includes personal details like names, location, contacts and others.

Then, get a credit history by authorising all your lenders to forward details of their transactions to credit reference bureau. They could include utility providers such as water service providers, electricity companies and other lenders like banks, Sacco's and others.

Credit Mix

It's the type of loans one has at the same time. A common mistake many people make that results in low credit score is over-relying on one type of credit out of, say, four types.

The first type is instalment credit where one repays a loan regularly in parts. This is the type of credit offered by banks, Sacco's, micro-finance institutions and others. It's this type of credit that people tend to rely most on, having instalment credit to repay at the same time.

Having more than one loan of this type to repay increases chances of default, which negatively affects your credit score.

Another form is revolving credit, where one is allocated credit to a certain limit after which the amount lent is required to be paid back before another loan can be taken. This is the structure that credit cards and overdrafts have.

The other type is open account credit, like that offered by utility companies like water and electricity, where customers consume services without limit and then pay after a prescribed period, such as monthly.

The last is type is consignment credit where one acts as a guarantor on behalf on another so they can access credit. You don't take the loan directly but acting as a guarantor is taken into account should one apply for a loan.

Good Mix, Good Credit Health

A good mix is the key to a good credit score and overall good credit health. Apart from easier access to credit, better interest rate, a substitute for a physical collateral, the availability of credit history takes care of two kinds of people who disrupt a positive cash flow not only for those who transact with them but also for themselves.

One such a person is a serial defaulter. This person will borrow from several sources st the same time, paying back none and moving on to other lenders who do not have a credible source of credit history.

Had there been a source of credible information on how this person repays loans, or doesn't, lenders would have been spared the losses they incur in lending to serial defaulters.

The other is the borrower who will pay, but never on time i.e. a delayed payer. If one is relying on such a person to pay back so that they can carry out some transactions or pay back money, they will lose out.

Good and Bad Score

The worst or lowest  and the best or highest scores range between 200 and 900 with 400 being the cut-off mark. A score below 400 indicates one who has defaulted on payments or about whom there's no information available. From 400 upwards up to 750 indicates one who pays on time with scores above that being exceptionally good.

For those with bad credit history, the good news is that it can be repaired so they can enjoy the benefits of a good credit rating. The simple way of doing this is by getting on track with any defaulted payments, which are picked by the bureau as they are made.

Remember, items that you have defaulted on appears on your credit profile for seven years as a legal requirement.

Comments

Popular posts from this blog

How to Verify Your Land Title Deed is Genuine

Cases of forged title deeds are on the increase. Therefore, people are losing money to con men as they are taken advantage of due to their ignorance regarding land transaction matters. While thinking of owning land, it is vital to be aware of how you can verify a title deed before investing your hard earned cash.

As you plan to commit your money to buy and construct your dream home, verify that, the seller is the genuine owner, the land exists and is free from restrictions. Also be sure that you are not buying land on a road or railway reserve and above all, that the title deed is genuine.

How farmers can double their bean yield production

"As Jack slept, the beans germinated in the soil, and by morning a big beanstalk grew in their place. When Jack saw the great beanstalk, he immediately decided to climb..." This is a classic scenario of 'Jack and the Beanstalk' fairy tale. The same is true for Kenya's bean variety that climbs and spreads on sticks producing double the yield of local varieties.

Due to subdivision of land in Kenya, farmers are not able to produce enough beans to feed the 38.6 million people living in Kenya.This is mainly due to shrinking land sizes. This is the reason why high yielding varieties of beans that only need a small area to grow has been developed. These new varieties of beans require support with stakes (sticks) to climb on when they are growing.


The beans can grow up to a height of 3.5 meters. The long stems of this variety of beans enable it to produce more pods as compared to the normal bean varieties (bush bean).   With good management climbing beans can produce u…

Herbal Plants used for Alternative Medicine with no side effect

In a sad note, most indigenous informants keep herbal knowledge, especially the actual preparation methods, strictly secret. Luckily, an aged medicine man from Gatundu in Central Kenya, whose great knowledge of medicinal plants facilitated the write-up of this article.
In part one of this article, plants are grouped according to their medicinal use. According to the aged medicine man, simply boil the leaves, roots or the bark; add honey or milk or soup to sweeten the concoction. He recommends taking a glass in the morning and in the evening for preventive measures. 
He cautions on their medicinal uses which should be considered as neither preparation methods nor dosage prescription are provided. This is a topic that would require much more time and I have decided to leave it for part two of this article.
Best Herbal Plants for alternative Medicine with no side effects

I have grouped their medicinal uses in three parts which are,       Alternative medicine for preventive measuresHerbal …