Credit reports in Nigeria

Credit reports in Nigeria still have a way to go to match the efficiency of those in developed nations. The reports play an active role in lending to people with less access to banking activities, such as the unbanked or underbanked or in situations where borrowers do not have good credit history.

A credit bureau is an agency that collects and maintains individual credit information and sells it to lenders, creditors, and consumers in the form of a credit report. The bureau compiles information on individuals and business entities regarding their credits, repayment, etc. and then creates a comprehensive credit record that may be made available to lending institutions and other users.

It is a report generated by the Credit Bureau and contains demographic and credit information on an individual including:

• Name
• Address/Contact details
• Other identifying information unique to the individual – e.g. National Identity Number, BVN, date of birth etc.
• Credit Score
• Type of Credit account(s)
• Terms of credit including original debt and balance outstanding
• Credit payment profile
• Other public records

The primary product of a credit bureau is a credit report. However, a credit bureau may provide additional products and services that leverage the predictive powers of the credit information it holds. Without information from a credit bureau, creditors typically must impose an additional risk premium prior to giving loans.

A credit score is a three digit numerical value representing a borrower’s credit worthiness based upon statistical analysis of the data found on the credit reports. The score represents what is called rank-ordering of risk in any population and is far more statistically objective than judgmental evaluations.

The primary users of credit information report include creditors, such as banks, mortgage finance companies, leasing agencies, insurance companies, micro-finance and SME lenders, asset management companies and other businesses that provide services to consumers on credit, including landlords, telecom and utility service providers. Additionally, because of other intrinsic characteristics of credit information, employers, for example, may use information from a credit bureau to predict employee reliability, while insurers may use credit bureau information to determine insurance risk for prospective policyholders.

It is important to understand that a credit report does not instruct a creditor to approve or deny credit. Rather, a credit report assists creditors with assessing the risks posed by the subject of the report. That is, if the credit history in the credit report shows a pattern of frequent defaults, the creditor, according to its own internal risk rules for the specific loan product, may classify the individual as high risk and, thus, highly likely to default. On the other hand, a credit report that shows a pattern of timely payments may enable a creditor to classify the individual as not likely to default. Of course, creditors use additional pertinent information to determine risk, such as the individual’s income or cash flow, total outstanding credit obligations, length of employment or business history, etc. Ultimately, the decision to grant or deny credit remains with the creditor.

The benefits of a good credit score are:

• Lower interest rates
• Higher credit score
• Ability to obtain credit without collateral or with reduced collateral
• Ability to acquire capital intensive items such as houses, cars and household goods without saving up for extended periods to pay cash
• Earning a reputation of being a responsible person

You build a good credit report by:

• Paying your debts as at when due
• Being truthful with any information supplied when applying for credit
• Taking credit responsibly
• book an appointment with Start Credits

No one other than entities allowed under the Central Bank of Nigeria and which have been registered with the Credit Bureau (authorized entity) may access any information.

If you have any issue with your credit report, please send a formal notification of the issue by visiting the website address of the credit bureau and sending a mail stating what the issues are. If you need your credit report please go to the website address of any credit bureau of your choice, make a request for your credit report and a list of requirements needed to access your credit report will be provided.

Credit history is generally defined as the record of a borrower’s payment behavior that shows his or her ability to repay a loan. It also includes information about late payments and bankruptcy. The significance of credit history lies in the fact that it acts as an important parameter for approval of loans by banks and financial institutions. A healthy credit history is in fact an intangible asset created by an individual which remains a life-long companion. In an era when credit bureaus are growing and influencing credit decisions of banks and financial institutions, it is important to maintain a healthy credit history. Even if we ignore the need for a good credit history exclusively for the purpose of borrowing, building a good credit history still remains important as credit behavior shows our approach towards managing our expenses and building a strong financial base.

While building healthy credit history is important, also important is to know how to build a healthy credit history. The following steps are extremely important in building healthy credit, which we must follow.

1. Cut your coat according to your cloth.

This old saying can act as a panacea for overcoming any issue in credit history. The saying gives a very important message which is, one should never borrow more than the ability to pay back the loan.

2. Check Your Credit History

It is suggested that every individual should check his/her credit history by obtaining credit report from credit bureaus. The reports from credit bureau carry details of your credit history. Though the reports come at a cost, it makes sense to go for these reports. If anything adverse is found in the credit history, you should try to resolve the issue found in the credit history rather than ignoring the discrepancies. Also check your own credit report, as it helps you to avoid any last minute surprises which can come your way when you go and borrow from a bank.

3. Pay Bills on Time

Once you become eligible for a credit facility, endeavor to pay each installment promptly and in full. To make sure you actually repay, don’t borrow too much, only charge on your account the amount you can actually repay.