The leading credit bureau in Nigeria, CRC Credit Bureau, has announced that over 30 million Nigerians now have credit scores recorded in its system.
In a statement released on Thursday, CRC Credit Bureau highlighted that this achievement underscores its dedication to improving financial inclusion and driving economic growth in Nigeria.
A credit score is a numerical indicator of an individual’s creditworthiness, based on their credit history.
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According to the bureau, having more than 30 million credit scores means that the financial system is now more inclusive and transparent, allowing a greater number of individuals to access credit facilities that were previously unavailable to them.
What Is a Credit Score?
A credit score is a three-digit number that offers a snapshot of your creditworthiness. Popular credit scoring models typically range from 300 to 850.
This score is derived from information in your credit reports, including the number and age of your credit accounts, your payment history, and your account balances. The primary purpose of a credit score is to predict how likely you are to repay a loan on time.
Why Lenders Use Credit Scores
When applying for a loan or credit card, lenders use your credit score along with other information to determine if you qualify and what terms you’ll receive, such as the interest rate and fees.
Credit scores help lenders assess the risk of lending to you, as they are generally a reliable indicator of how likely you are to repay your debt and make timely payments.
Often, lenders set a minimum credit score requirement for approval. If your score meets this threshold, they will also review other factors like your income and existing debt to decide whether to approve your application and what terms to offer.
FICO® Score vs. VantageScore
The two most widely used credit scoring models are the FICO® Score and the VantageScore®. Although they share some similarities, they also have notable differences:
- Scoring Requirements: To get a FICO® Score, you need at least one credit account that’s six months old and activity on at least one account in the past six months. With VantageScore, you can get a score with just one open credit account.
- Models: VantageScore uses a single model across all three credit bureaus (Experian, TransUnion, and Equifax), while FICO has distinct models for each bureau and specialized versions for auto and credit card lenders.
- Score Ranges: Both VantageScore and the base FICO® Score use a range of 300 to 850. However, FICO’s bankcard and auto scoring models use a range from 250 to 900.
- Weighting Factors: Both scoring models consider similar information, but they weigh factors differently.
FICO® Scores are used by 90% of top lenders, making them a strong indicator of your approval chances. However, VantageScore is frequently used by credit monitoring services and remains useful for evaluating creditworthiness.
Why Are There So Many Different Credit Scores?
You might notice different credit scores depending on where you check. This variation can be attributed to:
- General Updates: Credit scoring models evolve over time. For example, the latest VantageScore is 4.0, and the latest FICO® Score is 10. However, older versions like VantageScore 3.0 and FICO® Score 8 are still commonly used.
- Varying Information: Credit reports can differ slightly between bureaus, which can lead to different scores.
- Industry-Specific Models: Different scoring models cater to specific industries, offering tailored insights.
Types of Credit Scores
While VantageScore and the base FICO® Score are general models used widely, FICO also provides specialized scores, such as the FICO Auto Score and FICO Bankcard Score. These models emphasize your history with auto loans or credit cards.
Additionally, mortgage lenders often use older FICO® Score versions due to guidelines from Fannie Mae and Freddie Mac.
What Factors Affect Your Credit Score?
For FICO® Scores, five main factors influence your score:
Payment History (35%): This reflects whether you’ve paid your bills on time. Even a single missed payment can negatively impact your score for up to seven years.
Amounts Owed (30%): This includes your total debt and your credit utilization ratio—the percentage of available credit you’re using. Lower utilization rates are better for your score.
Length of Credit History (15%): This factor covers how long you’ve been using credit and the average age of your credit accounts.
New Credit (10%): This looks at recent credit inquiries and new credit accounts. Frequent applications can lower your score.
Credit Mix (10%): A diverse credit portfolio (e.g., credit cards, loans, mortgages) can positively impact your score.
What Is a Good Credit Score?
According to FICO, a good credit score is 670 or higher. The FICO® Score ranges are as follows:
- Exceptional: 800 to 850
- Very Good: 740 to 799
- Good: 670 to 739
- Fair: 580 to 669
- Poor: 300 to 579
How to Improve Your Credit Score
Improving your credit score involves several steps, tailored to your specific credit situation:
Pay Your Bills on Time: Maintain timely payments and address any past-due bills as soon as possible.
Reduce Credit Card Balances: Aim to pay off your credit card balances and keep your credit utilization rate low. Consider paying multiple times a month or increasing your credit limits if necessary.
Avoid Frequent Credit Applications: Limit new credit applications to prevent multiple hard inquiries and protect the average age of your credit accounts.
Dispute Inaccurate Information: Review your credit reports for errors and dispute inaccuracies with the credit bureaus. Correcting these can potentially improve your score.
Use Experian Boost: This service allows you to add positive payment history (e.g., rent, utilities) to your Experian credit report, which might improve your score.
Dr. Tunde Popoola, Group Managing Director/Chief Executive Officer of CRC Credit Bureau, commented on this milestone, stating, “Our aim is to ensure that every Nigerian, regardless of their economic status, has the chance to build a credit history.
We will continue to invest in educational initiatives to help individuals understand and improve their credit scores. By leveraging the latest technology, we will enhance our services to offer even more accurate and comprehensive credit information.”
He added, “CRC Credit Bureau has been at the forefront of this transformation. Through our relentless efforts in data collection, analysis, and technology adoption, we have enabled millions of Nigerians to build and maintain their credit histories.
Our services go beyond credit scoring; we provide comprehensive credit reports, advisory services, and educational programs aimed at improving financial literacy.
Looking ahead, we remain committed to empowering individuals and businesses, driving economic growth, and making financial inclusion a reality for all Nigerians.”
CRC Credit Bureau also noted that with credit scores now widely available, individuals and businesses can more easily obtain loans and secure better terms.
This increased accessibility to credit can lead to greater financial inclusion, economic development, and personal advancement. More Nigerians can now engage with the formal financial system, gaining access to loans, mortgages, and other financial products.
The bureau emphasized that reaching the 30 million credit scores milestone is just the beginning, and it remains dedicated to furthering financial inclusion and economic empowerment in Nigeria.
With over 15 years of experience, CRC Credit Bureau is a prominent data company in the industry, providing a range of services including data and analytics, credit management and consulting, financial education and training, and rental screening services.
The Bottom Line
Understanding credit scores can be complex, but improving your score is a straightforward process.
Regularly monitor your credit score to track progress and address any issues promptly. As you gain more knowledge about your credit, maintaining good credit habits will become easier.
