Credit Rating in Kenya
Credit rating in Kenya can also be called credit scoring. Credit rating in Kenya is done by financial institutions and Banks as they give credit to customers through loans or credit cards. The banking industry in Kenya uses the credit reference bureau results as one of the rating parameter.
There are two main ways that credit rating in Kenya is done. These are individual judgement method and credit scoring or rating method
Individual or staff judgement method of credit rating in Kenya
This method relies on the staff who is rating the application for the loan on to uses their good judgement. Credit rating staffs are aided in arriving at their decision by a list with checks and balances. The pros are weighted against the cons on the check list and the staffs make decisions. The staffs also consider the risks of having the applicant as a customer of their institution. The staff may compare an application against another application of the same category to assist him or her arrive at a decision.
Credit rating in Kenya method
This method does not rely a lot on the staff judgement as it is a statistical method. The applicant submits their application to the financial institution for review. The credit rating staffs use manual or automated systems which score the application. The rating form is something that is agreed in the financial institution and risk unit has to be involved. The banks try to address as many risk issues as they can in the rating sheet.
The applicant is rated on where they work, their marital status, their age, whether they own the home where they live and salary they earn. These rating criterion are dependent on the financial institution. There are many more criteria on which to base credit rating in Kenya. After the staffs have completed inputting the information from the application form to the rating sheet form, a rate is given. The rating method has less individual errors and biases. There is also increased and enhanced precision in credit rating.
The method is sometimes thought to be rigid. To overcome this problem, the credit rating staffs have over-ride rights to the rating system and the decision can be over-ruled. This over ride has to be approved by a supervisor.
The importance of credit rating and scoring of each application that is received in a bank cannot be ignored. In some countries, there are companies that do the credit rating and one can pay to get their rating for credit cards or loans. Credit scoring and Credit rating in Kenya is still developing and the score sheets keep changing.