Maintain Healthy Credit Scores

BEFORE I deliberate on today’s topic, it is important to state what prompted me to choose this topic.Till recent past the concept of ‘Credit Reference Bureau‘ was not prevalent in Tanzania.

But now it is the thing of the past, as the Central Bank (BoT) has already issued licences to few entities to render services of a credit reference bureau. But before we proceed, let us understand in simple terms what a credit reference bureau is.

A credit reference bureau means an entity specialised in the collection and sale of credit performance information for individuals and companies.
So going forward your credit behaviour will be monitored to determine how ’creditworthy’ you are and this is where it comes your ’credit score’ ­ healthy or unhealthy. Credit is one of life’s great ’catch­22′ situations. Let’s say you’re fresh out of college and wants to get your first credit card.

You dutifully fill out the forms and wait for the reply, only to find out a few weeks later that you’ve been rejected. Why? One of the possible reasons could be that at this stage you are not ’Creditworthy’ in the eyes of the bank, to start with.

The above type of situation for a student who is just venturing into the financial world is easily understandable. However, if a similar instance happens involving any other respectable person, the situation could really be embarrassing for that person.

These instances demonstrate how important the word ’creditworthiness’ is for any credible human being in today’s world. But before I proceed further it is important to clarify that ’creditworthiness’ of any person is not judged solely on one’s level of richness or poverty, but there are many other factors which determine a person’s creditworthiness.

It is quite possible that one person may be poor but enjoys healthy credit scores than the one who may be rich in terms of their respective levels of income but still has poor credit scores. So when I state how creditworthy you are, it does not have any correlation with one’s level of income.

Although, I agree that there are many polite ways to judge someone’s creditworthiness without possibly offending anybody. Having understood the importance of ’creditworthiness,’ let us attempt to elicit the meaning of this wonderful word, which quite often is used as one of the important barometers in the modern financial world.

In simple terms we can say that it demonstrates one’s ability to borrow money. The better one’s creditworthiness, the more likely it is that a bank or other financial institution will extend credit. In other words, ’creditworthiness’ refers to an assessment of the likelihood that a borrower will default on their debt obligations.

It is based upon many factors, such as their history of repayment and their ’credit score.’ Lending institutions also consider the availability of assets and extent of liabilities to determine the probability of default.

Thus, in conclusion, we may say that creditworthiness is a creditor’s measure of an individual’s or company’s ability to meet its debt obligations. From the above one can easily comprehend that it is not very difficult to establish one’s own creditworthiness.

The first step in evaluating your own creditworthiness is to look at your own money. How much money do you have to repay debts?

Do you have a savings account and how much in cash savings is in your account? This is a factor that you should evaluate.

It is one of the biggest deciding factors of whether or not you are credit worthy to get a bank to lend you money for a major loan of a mortgage or commercial loan for a business. Your own financial stability gives a good sign to the lenders that you can repay debts.


There are some factors/transactions which may impair one’s credit scores if not handled properly. Some examples of such transactions are:

(a) Late payments ­ How many late payments do you have on your credit card report? More recent late payments (below 30 days) will not be as problematic as older ones i.e. those older than 3 months.

(b) Delinquencies ­ A credit card company will report your late payments as delinquencies if you fail to pay their minimum payments. Some banks will report after 30 days and most report after 60 days.These delinquencies tend to remain on your report for 7 long years.

(c) Bankruptcies ­ Complete failure to repay debt. The more recent the bankruptcies are, the worse they look to lenders.

(d) Outstanding Debt ­ How much money you own or how much credit you have used up?

(e) Credit History Length- Thelonger the length of credit history, the more favourable you look in the eyes of the lenders. This is just another factor of having experience and be able to handle credit.

Few people think of evaluating their own credit worthiness prior to applying for credit. It has become a part of the financial culture to wait for the credit card company or the lending institution to tell us if we got the credit we applied for or that we didn’t.

Having the foresight to evaluate your own credit worthiness shows a degree of common sense and a willingness to spend a little time on research instead of waiting for two to three weeks to be told by the lending party if we are creditworthy or not. Before I stop writing on the subject, let me share with you a famous quote which states that ”as you sow, so shall you reap.”

This proves an important point on our today’s topic that your own actions (or for that matter inaction) will determine how creditworthy are you ­ the choice is yours. Cheers!!!