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How to improve your credit rating in 2023

Having a good credit score is important for a variety of reasons, including making it easier to obtain loans and credit cards, qualifying for lower interest rates, and potentially even increasing your employment prospects. In Kenya, credit scores are used by financial institutions and other lenders to assess an individual’s creditworthiness, so it is important to take steps to improve your credit score if you want to achieve your financial goals.

Here are five ways you can increase your credit score in Kenya:

Bill payment

pay your bills on time: Payment history is one of the most important factors that goes into determining your credit score, so it is crucial to pay all of your bills on time. Late payments can have a negative impact on your credit score, so it is important to set up automatic payments or reminders to ensure that you don’t miss any deadlines.

Credit utilization

Keep your credit utilization low: Credit utilization refers to the amount of credit you are using relative to the amount of credit available to you. If you are using a high percentage of your available credit, it can have a negative impact on your credit score. To improve your credit utilization, you can either pay down your credit card balances or ask for an increase in your credit limit.

Credit diversification

Diversify your credit: Lenders like to see that you have a mix of different types of credit, such as credit cards, mortgages, and personal loans. Having a diverse credit mix can improve your credit score, as it demonstrates that you are able to handle different types of credit responsibly. Having a diverse credit mix can improve your credit score because it shows that you are able to manage different types of credit in a responsible manner. It also shows that you are able to handle different types of financial obligations and can be trusted with more credit. It’s important to note that diversifying your credit doesn’t necessarily mean you should go out and apply for every type of credit available. Instead, you should focus on building a strong credit history by using credit responsibly and paying your bills on time. Over time, you may naturally end up with a diverse credit mix as you take out different types of credit to meet your financial needs.

Keeping track of credit report

Check your credit report regularly: It is important to review your credit report regularly to ensure that the information it contains is accurate. If you find any errors or discrepancies, it is important to dispute them with the credit bureau as soon as possible.

Avoiding too much credit

Avoid applying for too much credit at once: Each time you apply for credit, it can have a negative impact on your credit score, as it adds a hard inquiry to your credit report. To avoid this, try to limit the number of credit applications you submit. If you do need to apply for credit, try to space out your applications over a longer period of time.

What goes into determining your credit score in Kenya

In Kenya, credit scores are used by financial institutions and other lenders to assess an individual’s creditworthiness and determine their ability to pay back loans and other debts. Credit scores are calculated using a variety of factors, including payment history, credit utilisation, length of credit history, types of credit used, and new credit. Here is a more detailed explanation of each factor:

Payment history: Payment history is one of the most important factors that goes into determining your credit score. It refers to your track record of paying your bills on time. Late payments or missed payments can have a negative impact on your credit score, so it is important to make sure you pay all of your bills on time. This includes everything from credit card bills and mortgage payments to utility bills and car payments.

Credit utilization: Credit utilization refers to the amount of credit you are using relative to the amount of credit available to you. If you are using a high percentage of your available credit, it can have a negative impact on your credit score. To improve your credit utilization, you can either pay down your credit card balances or ask for an increase in your credit limit. It is generally recommended to keep your credit utilization below 30%, as higher utilization can indicate to lenders that you may be overextending yourself financially.

Length of credit history: The longer your credit history, the better. A longer credit history demonstrates to lenders that you have a track record of managing credit responsibly over a longer period of time. It also shows that you have experience handling different types of credit and can be trusted with more credit.

Types of credit used: Lenders like to see that you have a mix of different types of credit, such as credit cards, mortgages, and personal loans. Having a diverse credit mix can improve your credit score, as it demonstrates that you are able to handle different types of credit responsibly.

New credit: Each time you apply for credit, it can have a negative impact on your credit score, as it adds a hard inquiry to your credit report. To avoid this, try to limit the number of credit applications you submit. If you do need to apply for credit, try to space out your applications over a longer period of time.

In conclusion, your credit score in Kenya is determined by a variety of factors, including payment history, credit utilization, length of credit history, types of credit used, and new credit. By paying your bills on time, keeping your credit utilization low, building a long credit history, diversifying your credit, and avoiding applying for too much credit at once, you can take steps to improve your credit score and achieve your financial goals. It is important to remember that building and maintaining a good credit score is a long-term process, so it is important to be patient and consistent in your efforts to improve your credit score.

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