What was the most important number while you were in University? Your GPA, right?! It was all that mattered back then. A movement of 0.2 (we were told) could be the difference between a bright and promising future and spending the rest of your life as a bus conductor or something similar. If your GPA was tending towards a borderline lower second class and third class degree at the end of your penultimate year, nobody would need to tell you to buckle up. You just did. If someone you used to hang out with had a low GPA entering their final year they suddenly became scare. If you saw them, it was either going into our coming out of the library. Their attitudes, dress sense and in the case of some ladies, even skin tone would have changed.
Walking around campus with a GPA of something like 2.2 was a thing of shame. If you had friends with higher scores, you would be laughed at behind your back or worse still, ridiculed openly. Worst of all, you couldn’t go home to face your parents. Come exam time, you would become a pariah and no one would want anything to do with you except maybe your closest friends.
We all know better now obviously. Your GPA doesn’t necessarily guarantee success in the real world. There are 3rd class degree holders in agricultural science who run billion Naira companies today and first class degree holders who haven’t achieved anything near their potential back then, but that is the subject of another post. This post is all about credit. Now you are out of school, there is another number you need to keep track of, and that is your Credit Score which is 10 times more important than your GPA was back in Uni.
A Credit Score is basically a number that defines your credit worthiness and suitability for future credit based primarily on your credit history and other parameters. Your credit history is a record of all your loans and financial obligations from banks, collection agencies and even government whether good or bad. Now, while you may have a general idea of what your credit report may look like, after all, you borrowed money and you know the places you can’t go to anymore or the numbers you can’t answer calls from on your phone because you are still owing, it may interest you to know that your credit history is no longer just a matter between you and your creditors, it’s something which almost anyone can access (with your written consent) and just like in western countries, more people are using it to decide whether to extend credit to you, give you a job, rent you a house, do business with you or even get married to you. Ever wonder why Americans don’t joke with their Credit Score?
What I Learnt From My Credit Report
There are three Credit Bureaus in Nigeria and each of them is mandated by CBN to provide you with a free copy of your credit history once a year. I called CRC Credit Bureau Limited and they sent me my credit report within a week. The first thing I noticed was that the information was comprehensive. For a company that gathered everything they know about me from third parties, they had very up to date data. Even though I had changed my home address twice in as many years, they had my current address. Secondly, there had been six enquiries from banks and other institutions dating back to 2013. The names of the companies were not listed but I think I have an idea of who they might be based on accounts I’ve opened and loans I’ve applied for. Thirdly, they have a list of all my active facilities for anyone who requests for my credit report to see. My outstanding balances were shown and any overdue balances as well. If any legal action had been taken against me, that would be clearly stated. This section is the meat of the report. It’s what any user of the information wants to see. Are you owing anybody? If yes, how much and have you defaulted? The answers to those questions will inform their final decision about you.
So Why Do You Need To Start Borrowing Money Right Now?
Well, the short answer is, No credit is synonymous with bad credit. If you have not borrowed before and paid back on time, how can a new lender tell you won’t default on a new loan or a telco know that they can trust you with a post-paid line? As I mentioned somewhere above, employers will start checking credit scores (if they haven’t already); if you have no credit history, in the mind of the employee, it’s either you doctored a bad history somehow or they have one less basis upon which to make an employment decision. It could be the difference between hiring you and the next guy who has a long and stellar record.
I remember only a few things from when I turned 18. I remember the party, walking into pubs and clubs with my chin up and making eye contact with the bouncers for a change and I also remember how I started getting a whole lotta mail. Counting from the week of my 18th birthday till today, no one has come close to sending me as much mail as a particular credit card company (whose name I will not mention but some of you are familiar with these guys if you receive mail from them too or watch English football). They must spend an absolute fortune on direct mailing.
Their mail always had some fantastic offer of 0% interest on balance transfers or something equally eye catching. I eventually filled out one of their forms at a motor show and the rep who was typing information about me from behind a computer tucked in her lips and gave me a glance that told me immediately that there was a problem. “I’m sorry but your application has been denied”, she said. I asked why that was and her response was that my credit score was too low. In reality, my credit score was low because I had no credit history. The next thought in my head was naturally, “If no one will give me a credit card, how can I get a good credit score?”
Bring the story back home. Buy now, pay later schemes are popping up everywhere now. Banks and institutions with names you have never heard of before seem to appear almost overnight, splashing adverts of gleaming electronics and the latest mobile phones on your Blackberry Messenger, tempting you with insidious prose. You may not need to borrow to buy these things or perhaps you are someone whose father used to abhor debt and that has rubbed off on you. Well, I’m here to tell you that debt is not only good, it is necessary. You cannot function in some economies without a credit score and the same is happening here.
The second reason you need to borrow is, a good credit report brings you opportunities. Right now, I’m considering a passive income opportunity with a company which calls itself an online transportation network company but is really just a minicab company. I might share with you my breakeven point analysis with you in the coming weeks. Anyway, I am only considering the opportunity because my bank contacted me to say they would lend me money to buy a new car which I could use as a cab. They did this because I’m good for it. They know I’m good for it. The same applies in other climes. Banks offer buy-to-lease mortgage loans to their customers who meet a Credit Score threshold and some of these people have gone on to make a fortune in flipping houses.
Enough Talk, Act Now
I’m not asking you to go out and borrow millions just to improve your credit score. It’s better to take out smaller loans and repay fully each time while building up your history. Alternatively, apply for a credit card and use it.
Secondly, contact CRC Credit Bureau though their website or any of the other Credit Bureaus and request for your credit report online. Trust me, it’s an eye opener. Remember, it’s free. If there are errors on your report, you can take it up with the Bureaus and also the lending institution that provided the information.
Build up a healthy credit history. It will open doors for you in places you would least expect.
By Tunde Lawuyi