Understand Credit Reference Bureaus (CRBs) in Kenya

Credit Reference Bureaus (CRBs) are crucial in the credit flow in the formal financial sector, as they collect and provide information about borrowers' credit histories. This article delves into the concept of CRB Kenya, its history, the number of credit reference bureaus in the country, and various aspects related to credit scores and blacklisting.

CRB Kenya

What is CRB Kenya and How Did It Come to Existence?

CRB Kenya refers to the credit reference bureaus operating within the country, regulated by the Central Bank of Kenya (CBK). The primary function of CRBs is to collect and maintain credit information from various lenders, including banks, microfinance institutions, and other credit providers. This information is used to generate credit reports and scores that lenders use to assess the creditworthiness of potential borrowers.

Kenyan CRBs History

The development of Credit Reference Bureaus (CRBs) in Kenya has been a progressive journey to improve the credit market's transparency, efficiency, and integrity. Here’s a detailed look at the key milestones in the history of CRBs in Kenya:

2003: Introduction of CRBs as Part of the Banking Act Amendment

In 2001, the Kenya Bankers Association (KBA) and CBK embarked on developing a framework for credit sharing, which led to the formation of the East Africa Credit Bureau Association (EACBA). The legal frameworks were, however, introduced in 2003 when Credit Reference Bureaus were introduced in Kenya through an amendment to the Banking Act. The legislative change aimed to establish a framework for credit information sharing among financial institutions. The main objectives were to:

• Reduce the incidence of non-performing loans.
• Enhance the national credit risk management.
• Improve the lending environment by providing reliable credit information.

The amendment laid the foundation for developing a formal credit reporting system in Kenya.

2009: Official Launch of the Credit Information Sharing (CIS) Kenya

On the 27th of August 2009, the Central Bank of Kenya Credit Providers launched the Association of Kenya. It was, however, renamed to the Credit Information Sharing Association of Kenya (CIS Kenya) and relaunched on September 24,2013. The CIS framework in the Credit Reference Bureau Regulations of 2013 was designed to facilitate the exchange of credit information among banks and other financial institutions. The mechanism features included:

• A standardized process for collecting and sharing credit data.
• Guidelines for ensuring the accuracy and confidentiality of shared information.
• The establishment of a centralized database to house the credit information.

This initiative was instrumental in creating an efficient credit market, enabling lenders to make better decisions based on comprehensive credit histories.

2010: Licensing of the First CRB

In February 2010, Credit Reference Bureau AfricaLimited (CRBAfrica), the first Credit Reference Bureau, was licensed, signaling the beginning of formal credit information sharing in Kenya. The CRB started collecting and compiling credit information from various financial institutions, creating detailed credit reports for individuals and businesses. The introduction of the first CRB brought benefits, including:

• Enhanced credit risk assessment for lenders.
• Reduced instances of loan defaults and bad debts.
• Empowerment of consumers to build and improve their credit profiles.

Establishing the first CRB marked a new era in Kenya's financial sector, promoting a responsible borrowing and lending culture.

Current State: Expansion and Enhancement of the CRB System

Over the years, Kenya's CRB system has expanded significantly. Today, three licensed CRBs operate in the country: TransUnion, Metropol Corporation, and Creditinfo CRB. The current state of the CRB system is characterized by:

• Increased Participation: A broader range of financial institutions, including banks, microfinance institutions, SACCOs, and digital lenders, are now part of the credit information-sharing network.
• Improved Data Quality: Continuous efforts to enhance the accuracy and completeness of credit data, ensuring reliable credit reports.
• Technological Advancements: Adoption of advanced technologies to streamline data collection, processing, and reporting, making the system more efficient and user-friendly.
• Consumer Awareness: Increased awareness among consumers about the importance of maintaining a good credit history and how to access their credit reports.

How Many Credit Reference Bureaus Are There in Kenya?

As of now, Kenya has three licensed credit reference bureaus:

1. TransUnion
2. Metropol Corporation
3. Creditinfo CRB

These CRBs collect data from various sources, including banks, microfinance institutions, SACCOs, and other lenders, to create comprehensive credit profiles for individuals and businesses.

What is a Good Credit Score in Kenya?

A credit score in Kenya is a 3-digit numerical representation that ranges from 250 to 900, representing the creditworthiness of an individual based on their credit history. This score is used by financial institutions to evaluate the likelihood that a borrower will repay their loans. Here's a detailed breakdown of what different credit score ranges typically indicate:

700 and Above: Excellent

A credit score of 700 or above is considered excellent and indicates a low credit risk. Individuals in this range have a strong credit history, demonstrating a consistent ability to manage credit responsibly. The benefits of having an excellent credit score include:

• Easier approval for loans and credit cards.
• Access to lower interest rates and better loan terms.
• Higher credit limits.
• Favorable consideration for rental applications and utility services.

600 to 699: Good

Scores in the range of 600 to 699 are deemed good and represent a reliable borrower with a lower risk of default. Though minor issues or short-term fluctuations may exist, people in this category have a positive credit history. Benefits for individuals with good credit scores include:

• Higher chances of loan approval.
• Competitive interest rates, though not as low as those available to individuals with excellent scores.
• Decent credit limits and loan amounts.

400 to 599: Fair

A score between 400 and 599 is considered fair, indicating moderate risk. Borrowers in this range are still regarded as creditworthy by many lenders, but they may face some challenges:

• Higher interest rates on loans and credit cards.
• Lower loan amounts and credit limits.
• More stringent terms and conditions.
• Greater scrutiny during the approval process.

250 to 399: Poor

Scores in the range of 200 to 399 are classified as poor, indicating a high risk of default. Borrowers with poor credit scores have significant negative marks on their credit history, such as missed payments, defaults, or bankruptcies. Challenges for individuals with poor credit scores include:

• Difficulty in obtaining credit or loans.
• Very high interest rates if approved for credit.
• Limited access to credit products.
• Potential rejections for rental applications, utility services, and other credit-dependent services.

Factors Influencing Credit Scores in Kenya

Five main factors contribute to determining an individual's credit score in Kenya. These are:

• Payment History: It accounts for 45% of your score. Timely repayment of loans and credit card bills positively impacts credit scores, while missed or late payments have a negative effect.
• Amounts owed: Accounts for 20%. Your Score considers all of your accounts, including those in good standing. If you have a lot of debt relative to your available credit, this may suggest that you have taken on too much credit, and the lenders may interpret this to mean that you are at a higher risk of default.
• Length of Credit History: Longer credit histories provide more data for evaluating creditworthiness. Accounts for 10% of your score.
• Types of Credit: A mix of different types of credit, such as loans, credit cards, and mortgages, can positively influence the score. It accounts for 15% of your score.
• Recent Credit Inquiries: Multiple recent inquiries for new credit can lower the score temporarily. Accounts for 10% of your score when they do a hard inquiry.

Importance of Maintaining a Good Credit Score

Maintaining a good credit score is essential for financial health and access to credit. Here are some tips for maintaining or improving your credit score in Kenya:

• Pay Bills on Time: Consistently making timely payments is crucial for a good credit score.
• Keep Balances Low: Maintain low balances on credit cards and other revolving credit.
• Limit New Credit Inquiries: Only apply for new credit when necessary to avoid multiple inquiries.
• Monitor Your Credit Report: Regularly check your credit report for errors or inaccuracies and dispute any discrepancies.

How Do I Know If I Am Blacklisted by CRBs in Kenya?

To determine if you are blacklisted, you need to check your credit report. Here are the steps:

1. Request Your Credit Report: You are entitled to one free credit report per year from each of the three CRBs. You can request your report online through the CRB’s website.
2. Check for Negative Listings: Review the report for any negative information, such as loan defaults, late payments, or any adverse actions lenders took.
3. Verify the Information: Ensure that all information is accurate and up-to-date. If you find discrepancies, contact the CRB to resolve them.

To check your CRB status on TransUnion:

v  You first need to register by sending your full name to 21272. The SMS charge is sh. 19. Download the TransUnion app to save on this money.

v  You then enter your ID number

v  Choose Credit Status

v  You will receive your CRB status. If you receive good, it means you are not blacklisted, while default means blacklisted.

To check your status on Metropol Corporation:

v  First, pay a registration fee of sh.50 through paybill number 220388, and then enter your ID number as the account number.

v  You will get an SMS with a unique pin, a reference number, and a special link

v  Dial *433# and enter your PIN, and you will receive your CRB status. You can also visit the Metropol website, log in, and view your status.

 

Can Mobile Lenders List You on CRB in Kenya?

Mobile lenders can list you on CRB, but they must inform you 30 days before listing. The Central Bank of Kenya(Digital Credit Providers) Act of 2021 regulated the listing of defaulters on CRB after they became notorious for debt shaming. The popularity of digital loans in Kenya surged, and these lenders have become significant participants in the credit information-sharing system. If you default on a mobile loan or fail to make timely repayments, the mobile lender can report this to a CRB, negatively impacting your credit score.

How Do I Remove My Name from CRB Kenya?

Removing your name from the CRB blacklist involves several steps:

1. Clear Outstanding Debts: Pay off any outstanding loans or settle any defaults reported by lenders.
2. Obtain a Clearance Certificate: Once the debt is cleared, request a clearance certificate from the lender. This certificate is proof that you have settled the debt.
3. Submit the Certificate to CRB: Provide the clearance certificate to the CRB that listed you. They will update your credit report to reflect the cleared debt.
4. Follow Up: Check your credit report to ensure the information has been updated and that your name has been removed from the blacklist.

Credit Reference Bureaus in Kenya are essential for maintaining a transparent credit market. When you understand how CRBs operate, the significance of credit scores, and the process of managing your credit profile, you and your businesses can easily navigate any financial constraints in Kenya. Ensuring a good credit score and addressing any blacklisting issues promptly will enhance your loan opportunities and financial stability.