How to build Personal Credit in Kenya

It is said that the most successful people build their empires using other people’s money. But how? According to Oscar Wilde an Irish poet “credit is a young man’s capital.”  People who are risk averse will put money into their savings accounts while investors will borrow that money, invest and repay back with interest having earned their profits.

The next question would be, who qualifies for a credit facility and how does one build a healthy personal credit score or business credit history? Why is it that when two individuals walk into an institution seeking a credit facility one will walk out with a solution while the other might not yet they are in the same industry and business? It all goes back to credit worthiness and how convinced the institution is that their money will come back should they decide to advance a credit facility.

Let’s look at some of the routes one might follow;

• Establishing a lasting relationship with one financial institution – as opposed to credit hoping, sticking to one financial partner creates trust and makes them understand you and your business which makes it easy for them when making lending decisions.
• Good record keeping – simple book keeping is very important to run a healthy business, at a glance you will be able to tell whether you are running at a profit or loss. It’s the same with financial institutions, they want to understand the kind of person or business they are dealing with. Such book keeping records will give them that information.
• Timely repayments – every lender wants to get their money back at no extra cost. Paying back on time gives you a chance to build a good credit history.
• Borrowing with a purpose – every lender wants to get a plan from the borrower on how their money will be repaid, this has a direct relationship with the purpose of the credit. You plan first then borrow, many people borrow then plan which has a direct impact with probability of defaulting.

As a borrower before identifying your financial partner for credit purposes, a number of questions should run through your mind. Quite a number of people think that cost of the facility is the differentiator but it’s actually not. Some of the differentiators include;

• The turnaround time, how soon do you get the facility after application. One of the things we have discussed earlier is having a plan before borrowing the money. The plan should have some timelines and if the lender delays in advancing the facility then it may lead to loss of business opportunity
• Customer service– everybody wants to be treated right and with dignity, it’s said that people will not forget how they are made to feel.

Moving on with personal credit, it’s good to note that a large percentage of people fear credit facilities because of the stories they have heard or read about defaulters being impounded and auctioned leaving them in a worse state than they were before. To overcome that fear there needs to be an understanding of the whole credit process and when to read the red signs. As much as there are defaults that can’t be prevented due to eventualities such as sickness, business failure, pandemics and natural calamities, most can be prevented because they are pegged on personal characters. Major causes of default have been noted as, lack of a clear loan purpose, over-funding, multiple borrowing among others, which can actually be avoided.

At Springboard Capital, we care about our customers thus we offer financial advice to business owners in order for them to make informed decisions, when applying for a business loan. Our business loans are available from a minimum of KShs 100,000 upwards. Click here to view the requirement and apply for a Business Loan

Article written by Samuel Kareithi (Credit Manager)- Springboard Capital Ltd.