Understanding credit report; key to financial health

By Wezi Nyirongo

After the launch in Blantyre, in January this year, a campaign to raise awareness on the credit report is gaining momentum in Malawi to ensure consumers fully understand and properly manage their credit and loan facilities.

A credit report is a record of credit history and payment behaviour maintained by credit reference bureaus. It reflects a 24-month view of account history and payment behaviour.

In Malawi, every month, lenders send information on accounts, credit and loan history, and payment behaviour to two existing credit bureaus, namely, TransUnion and Credit Data CRB which provide free credit reports every year.

According to published information from the Reserve Bank of Malawi (RBM) and International Finance Corporation (IFC) of the World Bank, a credit report is one of the most powerful financial tools available to consumers.

“Access to credit aims to assist consumers and Micro, Small and Medium Enterprises (MSMEs) in achieving their long-term financial goals. That’s why the first step on the journey to financial health starts with regularly checking and understanding your credit report.” reads the statement.

“It tells you the state of your financial background, your personal payment history, and your creditworthiness. It can also help you protect yourself against identity theft and fraud. To get the full benefit from a credit report, you have to know how to use it to your advantage” it adds.

The credit reportincludes three components of personal information, account information and enquiries. The account information lists institutions and businesses, for example banks and microfinance institutions where the person accessed credit or provided goods and services.

The account information also provides details on credit limits, loan amounts and how the person is managing the loans in terms of payments.

The enquiries part shows people who viewed the credit profile and this includes how many times someone has applied for credit.

“In this day and age, a credit report is one of the most important documents in helping you build a healthy credit profile. A good credit history is essential for you to get a loan, a mobile phone service, a vehicle and in some cases, even a job,” according to the published information.

Apart from banks and other microfinance institutions, other institutions that may also review personal credit profile include insurance companies, mobile companies, landlords, and even potential employers, but with consent from the individual.

If a default occurs; when the person misses payments on an account for three consecutive months or longer, the country’s credit regulations provide that a credit provider must give a written notice before reporting the default to the credit bureau.