This is a form of credit abuse where credit
is used for speculative purposes on the part
of the borrower, the Lender as well may
pressurize you the borrower to take loans
which you do not need leading to abusive
lending. To avoid abusive lending keep
in mind the following: Have you shopped
around for the best deal? Do you feel the
lender pressured you to take the loan? And
do you understand the terms of the loan?
Common parts of a credit
application
Credit professionals know that whenever
lending is done to a customer the so called
the five C’s of credit is applied. A Five
C’s is a credit assessment system used by
lenders to gauge the credit-worthiness of
potential borrowers. The system weighs
five characteristics of the borrower and
conditions of the loan, attempting to
estimate the chance of default. The five C’s
of credit are Character, Capacity, Capital,
Collateral and Conditions.
Based on these Cs a credit application
form contains the following parts which
must be duly filled; Reason for Loan,
Personal Identification Information (P.I.N),
Employment
Information, Mortgage/
Rental
Information,
Documentation
Required (for some applications), Current
Debts, Credit References, Collateral (for
some applications), Bank References,
Signature and Date.
When then can we use Credit? This is not a
simple question to many but then maybe, can
you describe a situation when it is a good time
to use credit and when it is NOT a good time to
use credit? Many people have credit problems
because they didn’t get this one right because
of scarcity or lack of personal debt knowledge.
has a need that makes him/her to borrow
but while this is the case, it is important
for one to ask very pertinent questions
about the credit and the source. Remember
credit has a cost element attached to it so
then how much can credit cost? If you
make only the minimum payment for an
item, here are some examples of what you
might actually pay and how long it will
take you to pay it.
These questions will give one a rational
way of understanding credit; What is the
annual fee? What is the annual percentage
rate (APR)? When are payments due?
What is the minimum payment required
each month? Is there a grace period? Are
there other fees associated with the credit,
such as minimum finance charges? What
is the credit limit? What are the penalties
for late or missed payments? And what are
the terms and conditions of the credit?
What else is included in the fine print?
are the most misunderstood institution
as some people carry the mentality that
it is a place where defaulters are taken
to be listed but on the contrary the
definition of a reference Bureau is “A
credit reference bureau (CRB) is a firm
that collects information from various
sources and provides consumer credit
information on individual consumers
for a variety of uses. The firms are known
by various names: In the US the firms
are called credit bureaus, in the United
Kingdom, a credit reference agency,
while in Kenya it is a credit reference
bureau. A CRB provides information on
individuals borrowing and bill paying
habits”
Such information helps commercial
banks, saving and credit co-operative
societies (Saccos) and other microfinance
institutions to assess borrowers’ ability
to pay back a loan.
Questions to ask when applying How Credit Reference Bureau
for credit
work Having a CRB system in place can
affect the interest rate and other terms
of a loan.
One thing I am sure of is that every borrower In Kenya, it will be up to Transunion,
Credit Info, and Metropol East Africa
to share customer information with
financial institutions. The information is
made available on request to customers
of the credit bureau for the purposes of
credit assessment, credit scoring or for
other purposes such as employment
consideration or hiring a house.
In Kenya the Credit Reference Bureaus
The main role of the CRBs is to gather
data about consumers from creditors and
public records debts, and sell consumer
data to the financial industry in the form
of credit reports. The credit bureaus’
customers are financial institutions
(banks, creditors). Financial Institutions
want to avoid lending to bad credit risks.
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