We all dream of owning a house, a car or even start our own company; all these require a strong financial base which our current financial status might not support. Banks and other credit lending institutions have come in to help us realize these dreams but recent events have obligated them to impose stiffer conditions on us, their borrowers. (See more on loan defaulters here )

Lenders are now embracing credit sharing information which has seen a great decline in the amount of bad debts. A report published in April by Financial Service Deeping (FSD) Kenya – a non-profit organization that monitors financial services stated that 203,518 individuals were black listed as bad debtors in Kenya. Micro Finance Institutions (MFIs) are intending to release their list of credit defaulters.

How you can land on this list of shame

Your credit rating determines if you are credit worthy or not. A credit score is a statistical method of determining your likelihood to pay back borrowed money. Metropol, a recognized credit reference Bureau in Kenya states that the score ranges from 200 to 900 with a cutoff point of 400. Scores below 400 mean one has a poor credit history and those above 400 progressively indicates acceptable credit history. Banks or lending institutions consider this and with the current trend of sharing credit information, your credit score is readily available.

The primary factors used to calculate an individual’s credit score are his or her payment history, credit debts, time length of credit history, credit type mix and how frequent one applies for new credit.

Your credit rating also determines the interest rate that will be imposed on you. According to financial theory, increased credit risk means that a risk premium must be added to the price at which money is borrowed. Basically, if you have a poor credit score, lenders will not shun you, unless it is utterly awful; instead, they will lend you money at a higher rate than the one paid by someone with better credit score.

You need that loan to achieve your dreams? Don’t allow poor credit ratings stand in the way of achieving your dreams.