In the world of finance, be it individuals or businesses, your credit rating holds immense power. Whether you’re eyeing a new car, desiring a new phone, or simply want access to credit that improves the quality of your life, a strong credit report can make all the difference.
In our last blog post, we explored why it’s important to know your credit report, as it is your financial fingerprint. From securing lower interest rates on loans to potentially influencing job opportunities, your credit report plays a pivotal role in your financial journey.
Have you checked your credit report? Read more on how to get your credit report here
Now, assume your credit report is like an academic report that involves the use of ratings to measure how good or bad your performance is. We understand that in Nigeria, financial literacy is still evolving, and credit practices vary, however, knowing how to improve your credit rating is crucial.
Let’s delve into 3 essential do’s and 3 critical don’ts that will help you navigate the path to a healthier credit report.
3 Tips For Achieving A Better Credit Rating
1. Regularly Check Your Credit Report
In Nigeria, you can get your credit report from bureaus like CRC Credit Bureau or FirstCentral Credit Bureau as it’s your financial report card. Regularly checking it allows you to spot errors early and ensure everything is accurate. Just as you’d check your bank statement—if you spot an error in a transaction, you’d want to fix it immediately to prevent issues. The same principle applies to your credit report. Your credit report won’t fix itself. Ignoring it is like ignoring that engine warning light—it might seem fine now, but it could lead to bigger problems down the road. Stay proactive by regularly reviewing your report and addressing any issues that may affect your credit rating promptly.
2. Pay Your Bills on Time, Every Time
Punctuality pays off in more ways than one. Paying your bills on time is an effective way to boost your credit rating. Whether you get a quick payday loan through your bank app, make monthly/annual payments such as utility bill or waste management, and even TV subscriptions, timely payments reflect your reliability as a borrower. In Nigeria, where utilities sometimes come with deadlines that feel as tight as traffic on Lagos roads, setting reminders or automating payments can ensure you never miss a due date. Missing payment dates will sooner than later, dent your credit report, thus affecting your credit rating.
3. Diversify Your Credit Portfolio
Having a mix of credit types—like loans, auto loans and buy now, pay later (BNPL) loans—shows lenders you can manage various financial responsibilities. Also, effectively managing a combination of credit types will improve your financial understanding, positively impact various aspects of your life, and help you to make better financial decisions. This is proof to lenders that you can handle different financial “flavors” responsibly, which yields a positive credit rating for you.
3 Things To Avoid For Better Credit Rating
1. Don’t Binge on Credit
Applying for multiple loans within a short period can signal financial desperation to lenders. It’s like asking for pounded yam, amala, and fufu all at once and on the same plate—you might get overwhelmed.
Some borrowers credit binge because retail lenders will typically decline applicants with existing loan balances culminating in debt burden high enough to affect repayment. Also, frequent references on a credit bureau may point to a borrower’s inability to get credit from other lenders, which could be a symptom of financial difficulty. The key to being a responsible borrower with a good credit rating is in the ability to space out your credit applications and only apply for loans when you need it. In other words, build a history of responsible borrowing.
2. Don’t Exaggerate Your Income
When it comes to applying for loans, acceptance criteria vary with lenders, but most will only lend to customers who can prove they have a regular, secure income and can afford the repayments. Loan products may be tailored specifically for individuals or businesses, transactions or project expansion, collateral or non-collateral backed and so on. Product type and loan purpose determine the documents or information required to secure a loan and it is as much the borrower’s duty to provide accurate information as it is the lenders to confirm same.
Irresponsible borrowing behavior ranges from exaggerating income (and income sources), padding documents or outright misrepresentation of facts. Exaggerating your income causes the lender to doubt the character of the borrower and their ability to pay as and when due, leading to a decline of the loan application. Asides having a negative credit rating, lying about income can portray the borrower as someone up to fraudulent acts, which is a criminal offence if the lender approves the loan without realizing the income has been exaggerated.
3. Don’t Neglect Your Debt Repayment
Debts in Nigeria can sometimes pile up like traffic on Third Mainland Bridge during rush hour. Ignoring them won’t make them disappear. Always prioritize repaying your debts, starting with high-interest loans or credit card balances. Consistent repayment builds your credit.
We hope these do’s and don’ts have provided you with valuable insights on how to improve your credit rating in Nigeria. Remember, building and maintaining a good credit rating is a journey, not a sprint. By implementing these strategies, you can pave the way for better financial opportunities.
At Credit Direct, we understand the financial challenges Nigerians face daily. Whether you’re a public sector employee looking for a loan with favorable terms or an individual seeking financial support, our loan products are designed to provide you with peace of mind.
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We offer a variety of easily accessible loans to individuals and civil servants across Nigeria. Our quick loan disbursement process means you can access funds when you need them most. Trust Credit Direct to support you in your financial journey.
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