Kenya: Managing Your Credit Through Financial Hardship
With Kenya under partial lockdown, millions of consumers and businesses are facing some tough financial choices – but it’s vital that people stay in control of their credit through this stressful time.
According to TransUnion’s research, consumer debt balances grew in 2019 as growing numbers of consumers turned to unsecured credit to cover everyday expenses. Delinquencies also increased, with the biggest concern being personal loans, which showed a 77.7% rise in the delinquency rate over the previous year. The COVID-19 crisis will only exacerbate the situation as many people are struggling to make repayments on their debts.
Billy Owino, chief executive officer at TransUnion, says it’s important that consumers manage their credit even more carefully than usual through the COVID-19 pandemic, and beyond.
Protect your credit score
It’s vital to protect your credit score during tough times, because access to credit can often help you get through the rough patches. As income streams shrink in the coming months, people may find themselves having to use their credit cards more, or even dip into their home loans. The important thing is to pay all your bills on time if you can, says Owino: paying on time is the biggest factor that affects your credit score.
The Central Bank of Kenya’s revised Credit Reference Bureau (CRB) regulations will bring some measure of relief to consumers. The new regulations, which were gazetted last month, will see consumers who had previously been blacklisted for non-performing loans of less than Ksh.1,000 delisted. This will help consumers to start building their score in the right direction. The regulations also provide for free first-time clearance certificates, which will help the youth and those seeking formal employment for the first time save money.
Talk to your lenders
If money is tight and you’re worried you’re going to miss a payment or two, it’s best to contact your lender before the payment is due. You can explain your situation and ask whether they can offer any assistance.
Consider contacting your bank or credit card issuer if you’re affected by the COVID-19 pandemic. You may qualify for some leeway. Several Kenyan banks have already announced payment holidays to help consumers and small businesses get through this time.
Stay in control of your credit health
It’s important to check your credit report to make sure all your account information is correct. Consumers can access their credit reports through TransUnion’s Nipashe, which is available on the Google Playstore. Nipashe gives consumers an instant view of their credit standing, and they can request a credit report (which is also free once a year) for more information. If an institution has given them an adverse listing, they can work towards clearing it, or if there is a conflict, TransUnion will be able to assist them to resolve it. To use Nipashe, consumers simply SMS their name to 21272. They can then request their credit status.
“We know many people are feeling anxious about their finances during this challenging time. Organising your credit information and maintaining communication with your lenders are two ways you can help stay in control of your credit health during times of uncertainty,” says Owino.