The term “Credit score”, isn’t usually considered as part of our day-to-day lingua here in Nigeria. However, in other countries and certain cases where one would like to take a loan from a bank, the term is often used. In this article, we will look at what a credit score is, how it works, and how it affects your loan application.
A credit score is a 3-digit number, ranging from 300 to 850 (using the VantageScoring model), that indicates the level of risk associated with granting credit or loan to a prospective borrower or customer.
The lower it is, the higher the risk and shows that there is a high chance that the customer may default in payment, and vice versa. The scores are ranked as excellent, good, average, or poor. Simply put, a credit score is a representation of your creditworthiness.
Below are credit worthiness scales;
- 720 and above: Excellent credit
- 690-719: Good credit
- 630-689: Fair credit
- 300-629: Bad credit
Lenders and creditors often use the credit score for various risk assessment purposes ranging from market expansion, pre-qualification of customers, to credit evaluation.
How to check your credit score
Every Nigerian is entitled to one free Credit report every year from any registered Nigerian Credit Bureau. To get a free credit report in Nigeria, use any of the following sources:
- Dial the USSD code *565*8# on your mobile phone to get instant Credit reports from CRC Credit Bureau. This service is currently available to MTN subscribers only.
- Get a free credit report from Nigeria’s first independent licensed credit bureau. You only get one free report per month.
Do credit scores affect loan applications?
Yes, they do. The first thing lenders will look out for when considering your loan application is your credit score.
This is why it is particularly important to pay attention to your credit report. It determines whether lenders and creditors will do business with you and how good of an interest rate you get on financial products!