Building Credit

Introduction

No doubt, national emergencies tend to pose a threat to the health of our savings and investments. There is no gainsaying that news and trends in the financial sector are quite devastating. In the international scene, for instance, The United Nations Trade Agency, for instance, reports a $1 trillion loss off the value of the world economy. Again, the Organisation for Economic Cooperation and Development warned just a few days ago, that the shock from the virus is already bigger than the global financial crisis.

Apparently, even lending institutions are affected by the ‘global cold’ that has deprived us of our warmth. In light of this, how do we keep hope financially? How do we monitor our credit without putting a strain on our personal finances? We discuss some proactive measures just to stay ahead of your game as the pandemic looms.

1. Constantly Check Your Credit Report

During this period, you want to make sure your credit report does not contain any inaccuracies. If you are wondering how to arrive at this, you can simply get help from the Credit Bureau Association of Nigeria. Regular monitoring of your credit report ensures you keep tabs on fraudulent activities to avoid manipulations.

2. Now Is The Time To Settle Bills ASAP

Is this feasible considering the subtle financial crisis? Absolutely. However, if you do not see yourself managing this, you should reach out to your lender – in this case, which could be a bank or other financial institutions. The reason for settling your bills in time ties back to the overall timbre of your credit score. It’s okay if you can start with meeting the minimum requirements stipulated by your lender.

3. Be wary of your online identity

Con artists often employ emergencies like this in manipulating many. It is probably only normal that some of us are financially susceptible during this period. We recommend that you are vigilant of internet fraudsters looking to apply for credit in your name. You might want to double-check your security details as well as personal information to stay safe.

4. If need be, seek financial assistance

Again, this includes speaking with your lender or confiding in a credit counsellor. Additionally, you can declare “financial hardship” if you have to. Some lenders and financial institutions are helping consumers claim financial hardship from the pandemic by waiving late fees and forgoing interest charges.

If you intend to follow through with this, you might have to provide details on how the coronavirus has impacted or affected you.

5. Plan a budget

If you think the current condition may negatively impact your finances, you want to consider tightening your budget. You should review your income and expenses to accommodate the realities of the coronavirus. This way, you can balance your immediate needs from wants. 

Alternatively, if your financial institution offers credit cards, you might consider that option. The notion is to be prepared and in control during uncertain times. However, you should be cautious of how much you charge.

Conclusion

We do not plan for emergencies such as the coronavirus. When they happen upon us, however, it is imperative to be on the alert. Apart from what we have outlined, there are other preventive measures to ensure such that we do not drown in the financial shipwreck. While we stay safe to prevent the spread of coronavirus, we should keep our finances safe too. 

Stats provided by WorldEconomicForum

Surviving The Pandemic; CBN Being More Than A Regulator

In a quick response to the coronavirus which has most certainly led to unprecedented economic disruptions globally, we see a drop in crude prices, turmoils in the financial markets, border (air, land and sea) closure in some parts of the world and a large swamp of movement of persons in other parts. Many have taken urgent steps to cushion the effect of the global pandemic which has continued to evolve within the existence of today’s world. 

As a follow-up to the N50 billion targeted credit facility in which the CBN unveiled last week, there is a response to the outbreak as an emergency package to support households and SMEs affected by the pandemic.

The Credit Framework: The Condition

Only those that can show verifiable evidence of livelihood adversely impacted by COVID-19; including existing enterprises with bankable plans, will be able to take advantage of opportunities arising from the COVID-19.

As of today, as many businesses are wondering what to do with their loans after coronavirus, these businesses will fall in any of the categories laid down by the CBN following the Federal, State or Association policies that have emerged as a result of the outbreak.

Who Are ‘Credit-worthy’ by the CBN?

According to the guidelines, activities covered under the scheme include Agriculture value-chain activities, hospitality (accommodation and food services), health (pharmaceuticals and medical supplies), airline service providers, manufacturing, trading and others prescribed by the CBN.

The bank also added that the maximum loan amount of N25 million would get to SMEs while households can access a maximum of N3 million (and working capital would be a maximum of 25% of the average of the previous three year’s annual turnover).

There is a longstanding debate on the dominance and use of credit cards in Nigeria. However, it holds that its use by individuals and businesses is relatively low when we analyse the international scene. Here, we examine what credit cards are; their usage and overall timbre in the Nigerian Lending Industry.

What Is a Credit Card?

TheBalance describes it as a plastic card that lets you access the credit limit your card issuer gives you. A credit limit is like a loan. However, instead of giving you cash, the bank permits you to take as much credit as you desire for a period and then allows you to reuse the loan over and over. However, you are to pay back what you borrowed.

How They Work

A lot of processes goes on during a credit card transaction. When you swipe your card to make a purchase, the merchant’s card terminal asks your credit card issuer whether the card is valid and if you have enough available credit. Your card issuer sends a notification of the approval or rejection of the transaction. If it’s approved, you can take the goods and services and go on your way.

Every time you make a transaction, your credit goes down by that same amount. If you have a N100 credit limit and you make a N25 purchase, you’ll have N75 available credit remaining. You’ll owe N25 to the bank. If you borrow another N50 before paying back the N25 you borrowed, you would owe the bank a total of N75 and have N25 in available credit.

The difference between a credit card and a typical loan is that your limit is available after paying the balance on the card. In the earlier example, if you paid back the N75 that you owed, you’d have N100 of available credit again.

Credit Cards and The Nigerian Scene

For tourists visiting Nigeria, the perception of credit cards is different as opposed to that which natives hold. We are majorly associated with debit cards since an average Nigerian would rather classify it as a “form of imprisonment”. For financial institutions in Nigeria, offering these cards might pose a risk considering the rate of financial perversion in the country. If you have got a foreign-issued credit card, however, it can be employed in hotels, restaurants, malls, banks and other places. 

Conclusion

These cards are issued locally to high-value individuals in Nigeria. A challenge for its low usage could be due to its unacceptability by merchants worldwide. However, we do hope our ranking on the international scene increases even as innovations in financial technology dominate.

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Introduction

One way or another, we might have to take a loan sometime in the future. Doing this becomes feasible when we apply for a personal loan. A personal loan is what it is – private. It can be used for practically anything: Schooling? Health? Having cash on hand to handle a financial emergency can be a lifesaver, but a personal loan can affect your credit score in both good and bad ways.

Relationship Between Personal Loans And Your Credit Score

Just before a personal loan affects your credit score, your credit score affects your loan. There is a tendency for your credit score to fluctuate throughout your personal loan experience. It may rise and fall a couple of times, including when you apply for the loan, take on personal loan debt or repay personal loan debt. 

Did you know that some lenders use your credit score to determine how responsible you are with credit? After your loan is approved, your credit score may go up or down—and sometimes both.

When you have a higher your credit score, lenders consider you likely to be responsible with credit so that you may qualify for better terms. On the flip side, the lower your credit score, the less likely you are to be seen as creditworthy and approved for a low-interest personal loan.

Repaying Your Loan and Its Implications For Your Credit Score

If you eventually obtain a personal loan, you’ll need to make sure you have enough money for repayment. If you qualified for a personal loan with low credit, you may face a higher interest rate when paying back. Your payment history is the most significant factor in your credit score—it makes up 35% of your score. 

Negative information like defaulted loans can stay on your credit report for seven years. This glitch may make it harder for you to qualify for borrowing money in the future, whether it’s a car loan, mortgage, or credit card. While the impact of your default lessens over time, it can still hurt your chances of taking out credit in the future.

While a personal loan can help cover you in a financial bind, it can impact your credit score as well. Before you apply for your loan, check your credit and clean up any errors. Improving your credit score and report before applying not only increases your chances of approval but also may help you secure the lowest interest rate available.

Conclusion

If you are looking to up your credit score, you should create room for paying your monthly bill early enough. Avoid applying for unnecessary types of credit. It puts you off as a risky borrower before lenders. Only apply for a new loan when you need it.

And in the event you have an insurance policy, you can apply for insurance loan which doesn’t affect your credit score. Only use for emergency purposes, though. Cheers!

Benefits of using a business loan calculator

If you need to take a loan to finance the growth of your business, buy new equipment, or hire more employees, business loan calculator will help you determine the monthly repayments and credit charges for different types of loans.

Here are some more advantages of using business loan calculators.

1.Simplify the repayment

Do you have any problems while calculating interest rates and loan cost? The service has a simple structure. With its help, you can get your payments separated in months and the total interest charges in a matter of minutes. Completing the details of your auto loan takes less than a minute.

2. Real-time information

Interest rates point to change. That’s why the Consumer Financial Protection Bureau groups information on new interest rates from approved creditors across the country and makes this data available to everyone. This data aids business owners in making the right business planning.

3. Mobile friendly

At least half of the people access to the Internet with mobile phones. With an online loan calculator, there is no need to use a computer when you need to compare different loan deals. If you find an offer that you like, just create a bookmark for the web page.

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In the late 1980s and the early 1990s, the banking industry experienced a wave of financial distress. Financial distress? This was largely typified by predatory debtors who hopped from one bank to the other; neglecting their obligations. We had persons who would abandon their debt obligations from Bank A, and proceed to obtain yet another, from Bank B. Following this, the Central Bank of Nigeria identified the need to establish a central database regulating this perversion. 

This initiative was therefore implemented to obtain information from borrowers by financial institutions. By and by, the Credit Bureau of Nigeria was established. Its initiation was backed by a legislation Act that obligated banks and financial institutions to update lists of borrowers. Subsequently, this constituted profiling which determined the eligibility of intending borrowers. 

The CBN granted credit bureau licenses to three private companies:

– CRC Bureau Credit Limited

– CR Services Credit Bureau PLC

– XDS Credit Bureau Limited

These licences were granted in 2008. They eventually formed what is now regarded as The Credit Bureau Association of Nigeria in 2012. 

Functions of The Credit Bureau Association of Nigeria

According to Investopedia, a credit bureau is an agency that collects and researches individual credit information and sells it for a fee to creditors so they can decide in granting loans. 

The Credit Bureau Association of Nigeria performs the following functions:

1. Maintain a Database of Borrowers from Financial Institutions:

Information obtained usually include contact details of individuals and companies. This also cuts across a history of previous loans obtained by the borrower. Information provided can further accommodate whether or not they were paid in time, as well as bankruptcy and court judgments. 

2. Central Storage of Collected Information

The Credit Bureau Association of Nigeria wields the capacity to store large bouts of data. Not only will this remain over a long period of time, but it is also in a safe condition. Ideally, there is no room for loss, theft or alteration of files and data. This enables lending institutions to have long-term access to information.

3. Provide Credit Information Upon Request

The Credit Information Report is the major asset the Bureau sells to its members. When a lender requests Credit Information, the Bureau ensures it provides the report usually spanning a period of 3 years.

4. Eliminate Information Discrepancy

Recall our story of how The Bureau came into the limelight? Exactly, to manage the credibility of information disseminated to lenders by borrowers. In the absence of the Credit Bureaus, it is absolutely possible for Lagbaja to obtain loans from three different banks. What’s worse is that Lagbaja may end up carting away the funds.

5. Increased Access to Credit

Before the establishment of the Credit Bureau, gaining access to loans proved pretty cumbersome. In those days, you either had to own a megaton of valuable collateral or you knew someone that knew someone. You know how the drill goes. 

Since the advent of Credit Bureaus, however, it is relatively easier to access loans. The Bureau only provides a credit information report. Isn’t that awesome? Ideally, your footwear does not have to be pals with the banking hall before you can get a loan. 

How Do I Check My Credit Score?

Checking your credit score is pretty easy to pull through. The Credit Bureau Association of Nigeria offers a ‘Self Enquiry’ option to check your credit score. This service is absolutely free, however, you can only access your report once in a year. To do this, you can simply contact The Bureau and sign up for the service via email.

Like we established earlier, your credit score encompasses details of your credit activities across all sectors of the economy. It shows a history of loans a person has secured. And more importantly, it is a first step in owning your financial game. This is because many do not understand on the gravity of the credit score as it plays a pivotal role in the acceptance or denial of your loan.

What Can Affect Your Credit Score?

Did you obtain a loan and it took you forever to refund? This can ultimately decrease the rank of your credit score. Payment history is the protagonist in the thriller movie that tries to rub your authority in the mud. Lenders need the assurance that you can refund the loan in the nearest future. You don’t want to mess that up. 

Additionally, your level of debt matters. Having too much debt can easily affect your credit score. When you resolve them, however, your credit score tends to increase.

Conclusion

The credit score plays an important role in the lending industry. Getting your facts and figures right helps put you on the right track. It is ideal that you first gain a grasp of your credit score before you apply for a loan. This helps to gauge your expectations, as well as plan towards the feasibility of acquiring a loan.