Kenya Consumer Education Guide

Learn What Credit Can do for You

The purchasing power you get from a loan facility or money borrowed to spend now and pay back in instalments later is the most obvious benefit of credit. But what we’re focusing on here is how building your credit history can impact your future and why it’s important to start today.

What is credit?

Credit is the ability to obtain a loan based on trust you can and will pay back the loan (plus interest) in regular, smaller amounts in the future — until the entire debt is paid off.

Why is it important?

Credit allows you to access what you need now as opposed to saving up and paying cash later. Being smart with your money doesn’t mean avoiding credit; it’s about meeting your financial obligations on time every time to build a positive credit history. This is how you unlock opportunities for more credit and move closer toward reaching your larger goals.

What are examples of credit products?
 

• Credit cards
• Vehicle finance
• Personal loans
• Home loans

Where do you start?

To get credit and access life-changing opportunities, you need to build your credit score. To do that, you must open and manage credit products. Most Kenyans start with mobile credit, student loans or normal loans. 

Building a good credit score

You may have a small loan facility but want to become even more creditworthy. Continue paying your bills in full and on time. The longer your borrowing history and more diverse credit products you hold, the better (higher) your credit score will be.

What is a credit score?

A credit score is a three-digit number reflecting a snapshot of the information in your credit report. It’s what lenders use to evaluate how much credit to give you — and at what interest rate. This number may vary based on the information provided to each bureau.

What affects your credit score?

Your account payment history (whether your instalments are paid in full and on time) is the main factor affecting your credit score. Other factors include the amount of credit you use (the ratio of credit used to available credit), length of your credit history, and your mix of credit types. Lastly, new applications for credit can temporarily affect your score as lenders may assume it’s risky to extend credit if they see you’ve applied for one or more loan applications recently or over a short period.

Why is a credit score important?

Managing credit well and maintaining a good credit score can lead to better rates on loans and major purchases. If you haven’t borrowed money before, you won’t have a credit score, which can make it difficult to borrow money. This doesn’t mean you’re in a bad financial position, it just means there’s not enough information for financial institutions to decide whether to lend you money.

What is a credit report?

Your credit report is a collection of information supplied to credit bureaus (like TransUnion) by lenders you’ve borrowed from in the past. It contains details about your financial history and payment behaviours.

Credit confidence: Empower your financial future

As a Kenyan consumer, your financial health is influenced by how well you understand and manage your credit score. Actively managing your financial profile is critical to accessing the loan and credit opportunities you need to thrive in the modern economy. 

However, navigating the world of credit can be complex and challenging. Mismanaging your credit can lead to financial difficulties, limit your opportunities and prevent you from achieving your goals.

Our #CreditConfidence campaign can help you take control of your financial future by providing you the knowledge and tools to help manage your credit smartly. We'll guide you through:

• The importance of understanding credit scores
• How to read a credit report
• Practical steps to improve credit scores
• The influence of credit scores on loan approvals
• Factors that affect credit scores
• Strategies to maintain a healthy credit status
• TransUnion tools and resources

Begin your financial journey today — get a free credit report and protect your private information with TransUnion Nipashe today.