An economy grows when economic transactions can take place smoothly. These transactions can only happen when people and businesses can borrow money. Credit makes it possible for people to obtain things they can’t pay for all at once. Because these things, which range from cars to houses, are too expensive for most people. They turn to credit, to help them purchase the essential products and services they need.
Creditors and lenders usually report your behaviour to credit bureaus, when you borrow money from them. This report on your behaviour includes information such as whether you fail to make loan payments or make payments late. This information is aggregated and assessed by credit bureaus to create credit reports and generate credit scores. These credit bureaus also keep track of how you use credit, including credit cards, lines of credit, and mortgages. They also track if you pay your bills on time. Together this information is used to help create your personal credit report and credit score.
Your credit score and credit reports are some of the most important documents of your financial life. That is why building or restoring your credit history is a powerful catalyst for managing your money.
It can be easy to see both a credit score and credit report as one as the same. However, taking a closer look, differences in how they can affect your financial life will start to appear.
Here are a few common questions you might have:
What is a credit bureau?
A credit bureau is an agency that gathers and maintains information on people’s loan/credit performance and sells it to lenders, creditors, and other permissible parties in the form of a credit report. The information that the credit bureau gathers includes previous loans that have already been paid, new loans that have just been collected, how the loans have/are being serviced and if there are any outstanding balance(s). This information also includes some personal information.
Credit Bureaus keep all this information on individuals as well as business entities. This information can be both positive and negative. All this information is now strung into a database that allows lenders and other parties access to the credit history of a person or entity. Individuals can also see their credit report by applying to a Credit Bureau for access.
The main products of the Credit Bureaus are as follows:
- Credit Reports on every customer
- Portfolio Monitoring Report. Which are done every quarter of the year.
- Credit Scores
Here’s a list of renowned credit bureaus in Nigeria that can help you with your credit score and credit reports:
What Is a Credit Report?
A credit report includes information about your past and existing credit contracts. These contracts include loans, credit cards, debt collections, mortgages, whether you’ve paid your bills on time, and lists the businesses that have recently checked your credit history. These credit checks are known as inquiries. Your credit report also includes personal information, your current, and previous addresses, and your current or last known employer.
A credit report details how much you owe creditors, how long each account has been open, and how consistently you make on-time payments.
P.S: It’s important to check that the data is correct and up to date. Because your credit file changes constantly and it can have a powerful impact on your finances.
What Kind Of Information Is Included In a Credit Report ?
The information collected by credit Bureaus is regulated with the use of the Common Data Template which was designed by the CBN, IFC and CBAN and launched in 2016. Information collected by Credit bureaus and included in credit reports are in four categories:
- Demographic Information: name, address, means of identification, registration numbers (for commercial enterprises) etc.
- Information to the credit history: The bulk of your credit report consists of details about credit accounts that were opened in your name or that list you as an authorized user (such as your spouse’s credit account). Account details, which are supplied by creditors with which you have an account, including the date the account was opened, the credit limit or amount of the loan, the payment terms, the balance, and a history that shows whether or not you’ve paid the account on time. Closed or inactive accounts, depending on the manner in which they were paid can stay on your report for up to 10 years from the date of the last activity. Also includes principal amount, interest rate, when the facility was granted, how much had been collected etc. Here, there were classifications as well – performing, doubtful, default etc.
- Information on inquiries made on the customer : An Inquiry is recorded by a credit bureau whenever your credit report is shown to another party, such as a lender, service provider, landlord, or insurer. Inquiries remain on your credit report for up to one year.
- Public Records : Information on Collateral, Securities. Lawsuits, litigation, returned cheques, default in taxes, courts of law — including liens, bankruptcies,
There is some information that is not included in your credit report. A credit report does not include information about your checking or savings accounts, bankruptcies that are more than 10 years old, charged-off or debts placed for collection that are more than 7 years old, gender, ethnicity, religion, political affiliation, medical history, or criminal records.
What is a Credit Score
A credit score is a score that’s given to your credit report. This score is usually a three-digit number that ranges from 300 to 850, specifically those based on the standard FICO® Score. However, there are other scores that are two-digit that range from 0-100. A credit score shows the quality of your credit status. A credit score usually indicates your status as; excellent, good, average, or poor. Companies use this score to estimate the risk of lending an individual money or providing a service to that individual. Specifically, companies want to know the likelihood that you’ll fail to make payments in a given period of time. The high score shows that an individual poses little risk.
Who Can See Your Credit Report?
Fortunately, there’s a shortlist of people or entities that can access your credit report. So not just anyone can access your credit report. Only a business or individual with a “permissible purpose” can look at your credit report. Generally, this means the business or person must need to see your credit report to approve an application you’ve made, to collect on a debt, for certain employment purposes, to comply with a court order, or to underwrite an insurance.
The list of individuals or persons that can access your credit card include:
- Banks, specialized banks and other financial institutions
- Leasing companies
- Insurance companies
- Cooperative societies and institutions that offer credit to SMEs
- Utility companies including electricity, telecommunications and water corporations
- Asset management companies
- Suppliers of goods and services on a post-paid, deferred or instalment payment basis
- Entities that in their ordinary course of business have relevant information that complies with Permissible Purposes
- CBN’s CRMS.
Permissible Purposes for accessing an individual Credit report:
- Applicant or a guarantor for credit
- Review, renew, restructure or monitor credits
- Employment checks
- Prospective tenants
- Underwrite, review, or renew insurance policies or analyze insurance claims
- Application for credit contracts or other post-paid services
- Debt collection, enforcement of a monetary judgment or enforcement of any other debt
- Carry out KYC checks on any person for any permissible purposes
- Directive of a regulatory authority or a public body
- Compliance with a court order
What is the need of checking my credit score or credit report?
Different entities and individuals use a credit report to make decisions about people. These entities range from credit card companies, mortgage loan companies, auto loans, business loans, and insurance companies, even landlords and employers check credit reports to find out about your credit past. They want to know about your credit past to find out if you were financially responsible in the past. As it helps them ascertain if you will be responsible in the future.
P.S: When it’s time to consider any sort of financial move — a new home or car, a new credit card, a new auto insurance policy, a new business loan, even a new job — it’s time to check your report.
What to do if there are mistakes on Your Credit Report
If there are any relevant mistakes in your report. Then you need to dispute the mistake. That is why checking your credit reports every year to make sure they’re all correct is important. Because errors on your Credit Report may lower your credit score and keep you from obtaining credit when you need it. You can dispute mistakes on your Credit Report by immediately contacting a Credit Bureau.
Also, check your credit report for accounts you didn’t open. For charges, you didn’t make, and defaults you didn’t cause. If you see evidence of fraud, contact Nigeria Credit Reports immediately. Explain the situation and ask that a fraud alert be placed in your file. Also, report the fraud to the law.
Lenders use credit scores to decide who qualifies for a loan. What interest rate they will give the loan for, and at what credit limits. They also use credit scores to determine which customers are likely to bring in the most revenue. The use of credit or identity scoring prior to authorizing access or granting credit is an implementation of a trusted system.
How Are Credit Scores Calculated?
A person’s credit score is calculated by aggregating the history of that person’s payment capacity and their history of meeting due to date obligations.
What Is a Good Credit Score?
A good Credit Score usually ranges from 650 – 749. While an excellent score ranges from 750 – 850.
How can I get a Free Credit Score and Free Credit Report in Nigeria?
You are entitled to one free Credit report every year from any registered Nigerian Credit Bureau.
- Apply here to get your free report from CRC Credit Bureau. CRC Credit Bureau also offers a USSD code for instant Credit reports. Dial 5658# on your mobile phone to get your credit report in an instant from CRC Credit Bureau. This service is currently available to MTN subscribers only.
- Get a free credit report from Credit Registry. Credit Registry also offers an annual free credit report. You can click here to get it.
- Get a free credit report from Carbon (Paylater). Carbon, formerly Paylater also offers free credit report to Nigerians. You can have access to the report by registering here
Unlike these credit reports that are available once for free annually. Your credit score is usually gotten for a fee from the aforementioned registered Credit Bureaus.
How to Check your credit score in Nigeria
How can I check my credit bureau records?
You can check your credit bureau records by applying to any Credit bureau mentioned above. Some Credit Bureaus also offer Free Credit reports as stated above.
What happens when you get reported to a credit bureau?
When you make a late payment or fail to pay, it gets reported to a Credit bureau. The Credit Bureau adds the information to your credit report. Which in turn hurts your credit score.
Report of payment defaults is added to your credit report at least 30 days after the payment due date. However, some creditors or lenders report defaults on payments after 60 days past the due date.
P.S: Your creditor can tell you its policy for reporting late payments to the credit bureaus.
Your credit report and credit score will follow you throughout your life and can help you financially — or hurt you. Always check and review it carefully!