5 facts you must know about credit score in Nigeria

Credit scores are the ‘grade system’ of the lending world. It tells your lender what you scored in your previous exams (former loans). And your lender judges your creditworthiness by your past grades.

Since everybody wants good grades — Here are some key facts you must know about credit scores as a Nigerian living in Nigeria:

A credit report is a detailed record of an individual’s credit history and it contains a wide range of information about you and your accounts which include but are not limited to personal information, loans/debts, and payment history. While, a credit score, on the other hand, is a graded numerical summary of the information above that determines an individual’s creditworthiness. A credit score’s rating changes based on the information added to the credit report.

A credit score can change over time, it’s not permanent or static. Depending on an individual’s credit history and credit management habits, the credit score can either rise or fall. You can prevent a credit score fall and improve the chances of a climb by; quick repayment of debts, frequent small loans etc.

Although, you should know that if an individual doesn’t take on any more loans, their credit score will remain static right where it is. As we mentioned earlier, the rise or fall of your credit score is fully dependent on how you manage your debts. Clear up all pending debts if there are any and watch your credit score gain back its life.

We know that you have been told that paying your debts on time can help you improve your credit score, but this doesn’t always happen immediately. It takes some time for the credit bureau to update your credit report and as such, some debt may reflect on your report for a long time.

This doesn’t mean that your credit score will be graded incorrectly, only that it will remain as it was until your credit report has been updated by the bureau. This is why we advise that you avoid the pit of bad credit scores, the woes far outweigh the pros.

Here’s another important fact to know about credit scores — your income has absolutely nothing to do with your credit score. A credit score can only be affected by an individual’s credit history.

A high income may be able to secure you a large loan, but it’s what you do with that loan that determines if your credit score will be good or bad. Repaying debts on time or at the due date is a good way to get a good credit score. The idea that wealthy people have better credit scores than the average earner is false. Again, we say that your credit score is only affected by how you manage your debts.

Individuals who have no credit history, have no credit record and as such, have no credit score. This makes it hard for lenders to determine if they are trustworthy.

Lenders consider a lack of credit history as a big risk, as they have no way of knowing if the individual asking for a loan is actually creditworthy and will not run away with their money.

But here’s the thing, as an individual with no credit history e.g a university student in Nigeria, your attempt to gain a credit history should start slow by applying for small loans with short repayment periods that you can pay back with ease. This helps you slowly build a credible credit history.

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In 2023, we hope to further educate the average Nigerian on the necessity of having a credible credit history through responsible loans from ethical lenders.

We also work towards a total mind shift of Nigerians about the negative myths surrounding “loans”. We do all of this by sharing the right information with you.

You can send us a message right now at support@irorun.com to get all of your loan questions answered and perhaps be on your way to your first loan with us!