Picture this: you’re about to start your dream business but you need a loan. You’ve asked your friends for a loan but they’ve already loaned another of your friends money so they can’t give you any money now. You turn to your bank for a loan.
Sure, your friends will find it easier to loan you money because they know you and know that you always pay back on time. But how do you communicate that you’re good with loans? This is where your credit score comes into play, a mysterious number that can open doors or close them.
In this article, I will guide you through the process of checking your credit score in Ghana, where you can check it, how to check it, and everything you need. If you are from Nigeria and would like to read an article more suitable for you, you can read our guide on checking your credit score in Nigeria.
Why your credit score in important
Imagine your credit score as a report card for your finances. It’s a number that tells lenders how good you are at paying back money. Think of a friend, let’s call him Ama, who promptly repays his loans whenever he borrows from you. You’re more likely to loan Ama more money and even give him loans more often. In a sense, you have a mental credit score for your friend that views them as a good lender.
Say you have another friend, Kojo, who never pays loans on time. Every time you loan him money, it’s a hassle to get it back. Chances are over time you will refuse to lend Kojo more money and even when you do, you’ll only lend him a little money at a time.
In the financial world, Ama would have a high credit score while Kojo would have a low credit score. With banks especially, a good credit score can be your golden ticket to better loan terms. It influences everything from the size of your loan to the amount of interest you may be charged on the loan
Does Ghana have a credit score now?
Knowing your credit score is an important step for financial management. Many people take small loans from businesses without being aware of how it impacts their financial future. If you know your credit score, you can make changes to your financial behavior to improve it.
The answer to whether Ghana has a credit score is a complicated one. As of the time of writing (October 2023), the general answer to it is No, Ghana does not have a credit score. However, this does not mean that lenders and creditors do not have any means of knowing whether a person is a good lender or not. They do. However, there is no way for individuals to know what their score is and how to change it right now.
One of the challenges credit bureaus and other financial institutions have raised that prevents them from creating a credit score is the lack of a unique personal identifier. However, with the advent of the Ghana Card, that is likely to change. The government has announced plans to introduce credit scoring linked to the Ghana Card in 2024. When that happens, we will be sure to update this article.
What are the Credit Bureaus in Ghana?
Credit bureaus are the pillars of credit scoring in any society. They are agencies that keep track of everyone’s financial activity including their lending habits.
In 2022, the Bank of Ghana revoked the licenses of Hudson Price Data Solutions, one of the country’s credit bureaus for non-compliance with the Credit Reporting Act. This has left Ghana with only two active credit bureaus: XDS Data and Dun and Bradstreet. Both bureaus are licensed by the Bank of Ghana to provide credit ratings, and while they do credit reporting, they do not currently provide credit scores to individuals.
However, once the credit scoring starts in 2024, you can expect them to provide Ghanaians with credit scores.
What do I do if my credit score is bad?
Most credit bureaus use the FICO scoring model, meaning that your score will range from 300 to 850. Here’s what your credit score says about you as a borrower:
- 300 – 499: Very poor
- 500 – 600: Poor
- 601 – 660: Fair
- 661 – 780: Good
- 781 – 850: Excellent
Chances are when you are finally able to check your credit score, you find out it is bad. What do you do then? A bad credit score can be the stumbling block between you and the loan that may change your businesses, so you have to fix it. Here’s a step by step guide for fixing bad credit:
- Review your credit report for any errors: Review your credit report carefully for any inaccuracies or errors. If you find any, dispute them with the credit bureau. Sometimes, errors on your report can unfairly lower your score.
- Pay Your Bills On Time: Late payments can have a significant negative impact on your credit score. Set reminders or automate payments to ensure you pay all your bills on time.
- Reduce Your Debt: High levels of debt can hurt your credit score. Make a plan to pay down your debts, focusing on high-interest debts first.
- Limit New Credit Inquiries: Each time you apply for a loan, it can result in a hard inquiry, which may negatively affect your score. Try to avoid applying for new loans unless absolutely necessary.
- Keep Old Credit Accounts Open: The length of your credit history can impact your score. If possible, keep your older credit accounts open, even if you don’t use them frequently.
- Get Professional Advice: If you’re overwhelmed, consider seeking advice from a credit counselling service. They can guide managing debt and improving your credit score.
Conclusion
Although there is no official credit scoring available in Ghana right now, lenders still evaluate your loanworthiness based on your financial history. As such, it is important to have good financial habits.