How a Credit Report Can Help Strengthen Your Finances

Most Rwandan consumers are aware of credit and loan facilities, but far fewer understand how the management of these facilities affects their financial health. Access to credit aims to assist consumers in achieving their long-term financial goals. That’s why the first step on the journey to financial health starts with reading and understanding your credit report.  

Samuel Tayengwa, the Rwanda acting country director at information and insight provider TransUnion, says a credit report is one of the most powerful financial tools available, as it reflects and shows the state of your finances.

“When you apply for credit, lenders check your credit report and credit score before approving a loan. The better you understand what these are and how they work, the better you can manage your finances and transact with confidence,” says Tayengwa.

What is a credit report?

A credit report is a history of credit commitments, and how you’ve paid them back. It contains:

  • Personal information: name, address, marital status, and employment information.
  • Payment information: a list of all regulated financial institutions (banks, SACCOs, MFIs, telecos etc.) and businesses that have given you credit or lent you money; your credit limits, loan amounts, payment history or if a judgement has been issued against you
  • Current financial information: your level of debt, and how many times you’ve applied for credit recently

How does it get created?

Every month, lenders send a report on your credit and loan history, and your payment record, to credit reporting companies like TransUnion.

What’s the difference between a credit report and a credit score?

A credit report is the record of your financial history and payment behaviour. This information is used to calculate your credit score, which helps lenders evaluate how likely you are to pay back a loan.

Why is it important to have a good credit score?

When you apply for credit – like a home loan, a car loan, a new credit card, a clothing store account or a new cellphone contract – banks and lenders will access your credit report to see if you’re suitable for credit. Some landlords will check it before they rent a property to you.

If you have a good credit score, you might get a better interest rate. But a credit report with negative listings, such as defaults and judgments, or too many enquiries for loans or credit over a short period of time, could result in a low credit score. This could mean you may pay a higher interest rate, or even be unable to access the credit you want.

How do I improve my credit score?

“The good news is that it’s quite possible to improve a low credit score through responsible financial behaviour. The biggest influence on your credit score is how you manage your accounts, and whether you pay your accounts on time. Never ignore letters of demand and overdue accounts. If you can’t meet your repayments, call the credit provider and ask for help to make new payment arrangements,” says Tayengwa.

Check your credit report

You’re entitled to one free credit report every 12 months. Use it. Get a copy of your credit report from TransUnion and check it carefully for inaccuracies, like accounts that you don’t recognise or incorrect information about late payments. Disputing this kind of inaccurate information, and getting it removed from your credit report, can improve your credit health. It can also help detect fraud if someone else has applied for credit in your name.

You can check your credit status by dialing *707# and entering your NID to register. Just follow the prompts to check your credit status. You can also request a clearance certificate to show your debts have been settled.