Basically, the way to improve your credit score is to show that you can reliably pay back your debts. To do that, you need to build a good credit history over time — take out small to medium sized debts and pay them back over time (not all at once — show you can do it over a long period of time). Here are some tips:
- Check your credit report. You can get a your credit report once a year from any of the 3 CRBs in Kenya. This will allow you to see if there are any mistakes, and to get an idea of where you’re at. They won’t give you your credit score, but you can at least see what’s on there. If there are errors, take steps to correct them.
- Establish credit accounts. Personal loans or credit cards are usually the best ways to do this. Don’t take out a bunch of junky store credit cards. Take out a few cards that you can keep for a long time. Getting cards with high limits but keeping the balance low is best.
- Pay your bills on time. This is obvious, but late payments will hurt your score big time. Don’t be late.
- Don’t close out old accounts. If you have cards that you’ve held for a long time, keep them under your name, even if you don’t use them. Accounts with long standing are good for your score. Closing accounts hurts your score.
- Get your parents to help. If you’re young and just starting out, you face the Catch-22 situation of not having enough credit history to get loans or credit cards. But you can’t establish that history until you do get them. The answer is to get your parents (or someone with good credit history) to co-sign for you. Make sure your name is on the loan, and be sure that you pay it on time. Once you’ve done that, you have a history. Another solution, if you’re a parent, is to take out a loan with your son or daughter’s name on it, and pay for it yourself. This way you know that it’s being paid on time, so you don’t risk your own credit score, but your child is also getting a positive credit history. Update: A reader pointed out that opening a loan in someone else’s name is illegal … what I meant here is that you could co-sign on a loan with them, with their consent, and pay it back for them to build up their credit. Don’t do it without their knowledge.