By Lilian Gachoki
While technology has eased access to credit, it has also made it hard for people with a negative credit rating. A good number of people has found itself in a crossroad as it cannot access credit due to the fact that they are negatively listed in the credit reference bureau (CRB).
When the covid-19 pandemic hit our country, we found businesses closing down due to poor sales. This prompted financial institutions to give moratorium on loan repayment. Despite the moratorium, some businesses which had been negatively listed on CRBs couldn’t recover from the financial mess.
In addition, loss of jobs was the order of the day. Most people who had loans from financial institutions couldn’t repay as they had lost their income. Subsequently, these people who defaulted on loans got listed on CRBs. There are valid reasons why people get listed on CRBs. One of these is lack of prudent borrowing. This explains how some people get themselves into debt traps after borrowing for consumption. Some even borrow from one mobile app to pay another. It’s unfortunate that the betting craze has caught up with many a youth, who borrow to finance their gambling and when the windfall doesn’t come their way, they default on repayments, and end up with a negative credit rating. When these debts balloon to unmanageable levels, the borrowers find themselves defaulting and listed at the CRBs.
Some people also get conned while transacting. A couple of months ago, I interacted with a business owner who is in the import space. He had borrowed money and credited the amount to the clearing agent who misappropriated the funds and left the businessman high and dry. Although the matter is now in court, the business woman has been listed negatively because he is not able to raise the installment on a monthly basis.
It’s important to highlight that there are three levels of CRB listing, namely:
- Performing
- Performing with default history
- Non-performing
While there are various circumstances why one gets listed negatively, being listed is not a financial death sentence. One can be able apply the following tips:
- Understand the listing: Obtain a copy of your CRB report to fully understand what is listed and ensure that all information is accurate. Mistakes can happen, and if there is any incorrect information, you should seek to correct it immediately.
- For debts appearing as a write-off on the CRB report, negotiate with the financier on discounts and get a repayment plan. When you start paying, the listing moves from no-performing to performing with default history.
- Consolidating loans into one. This will ease on the repayment hence one is not overly strained financially.
- Restructuring of the loan. One can request the financier to increase the repayment period in order to ease the repayment, hence the loan will start performing with consistent repayment.
- Sell off idle assets and settle the loan instead of paying the interest cost of borrowing yet one is straining financially.
- Consider getting investors into your business to inject some financing which can help in repaying some of the business debts. One can have an exit clause while selling the company shares.
- Discipline. Don’t overstate the amount you need while borrowing as excess is likely to go into consumption which is not income generating.
- For parents who have given their children phones who are underage, monitor whether they are borrowing and when they get to age of majority allow them to procure their sim cards or transfer the line to them. There are people whose credit score is affected as a result of debts they did not procure.
- Self-lifestyle evaluation- Could one be spending money on unnecessary things of which this amount could be used for loan repayment?
- For businesses with potential of growth, approach financiers who are willing to support the business through financing. In my line of duty at Dream Credit Limited we have been able to evaluate the clients objectively on case to case basis and lend to them to rebuild their businesses. We have seen some of these businesses’ credit score improve tremendously as a result of some of these interventions.
