How to build, maintain credit history

Credit history is no longer a Western concept; it is gradually shaping how Nigerians access loans, mortgages, and financial opportunities. By starting small, paying back loans on time, using credit cards responsibly, and monitoring reports, individuals can build a strong financial reputation that opens doors. In a country where cash has long been king, TEMITOPE AINA explores how creditworthiness is emerging as the new currency

In many developed economies, a people’s financial credibility is defined not just by how much they earn, but by how well they manage borrowed money. This is measured through a “credit score”, a rating system that lenders use to determine if someone can repay loans responsibly. While credit scoring is still at a developing stage in Nigeria, more banks, fintechs, and credit bureaus are gradually adopting it. For young professionals, entrepreneurs, and even families, building a good credit history is becoming an essential step toward securing bigger financial opportunities.

Why credit history matters

Credit history is more than just a financial buzzword; it is the backbone of trust between lenders and borrowers. Simply put, it is a record of how you have borrowed and repaid money over time. Each repayment, default, or outstanding balance creates a trail that reflects how reliable you are with money. In countries like the United States and the United Kingdom, credit scores determine everything from the interest rate on a car loan to the ability to rent an apartment. While Nigeria is still catching up, the foundations are firmly in place.

Licensed credit bureaus such as CRC Credit Bureau, FirstCentral, and CreditRegistry track these records in Nigeria. Banks, microfinance institutions, fintech companies, and even cooperative societies now consult these databases before approving loans. This means that the way you handle an N10,000 microloan or an N500,000 salary advance could directly affect whether you qualify for a bigger mortgage, a car loan, or business financing in the future.

A positive credit history comes with clear benefits: faster loan approvals, larger credit limits, and, in some cases, lower interest rates. For instance, a young professional with a track record of paying small loans on time may qualify for a car loan in just a few days, while someone with defaults could spend months battling rejections. Beyond loans, some landlords and corporate employers are beginning to look at credit history as a measure of financial responsibility.

On the flip side, the dangers of poor credit cannot be overstated. Missing payments or refusing to pay debts can blacklist your name in credit bureaus, making it almost impossible to access formal credit. Many Nigerians who defaulted on small digital loans are already finding it difficult to secure bigger loans from banks today. This often forces them back into informal borrowing channels such as moneylenders or community savings groups, which may charge far higher interest.

In short, a good credit history opens financial doors, while a poor one slams them shut.

Starting small: Microloans and digital lending

For many Nigerians, the first step to building credit history is not through big bank loans but small digital loans. Fintech apps like Carbon, FairMoney, Branch, Renmoney, PalmPay, and even OPay have created accessible platforms where anyone with a smartphone and BVN can apply for quick loans. These loans sometimes start as little as N5,000 or N10,000, with repayment periods ranging from a week to a few months.

The beauty of these platforms is that they don’t require collateral, guarantors, or endless paperwork. Once you repay on time, your borrowing limit increases—gradually moving from N10,000 to N50,000, and in some cases up to N500,000 for long-term, consistent borrowers. More importantly, these repayment records are reported to credit bureaus, which helps you build a financial footprint visible to bigger lenders.

However, there is a catch. Defaulting on even the smallest loan leaves a negative mark. Many digital lenders automatically flag late payers to credit bureaus, and those records can stay on your report for years. A young graduate who ignores a N15,000 loan repayment today might find himself unable to secure a legitimate business loan of N1m tomorrow.

Experts recommend treating microloans as stepping stones rather than “free money”. Borrow only what you can comfortably repay, and use the opportunity to demonstrate financial discipline. For instance, taking an N20,000 loan to sort out a pressing bill and then repaying it on or before the due date signals to lenders that you are reliable. Do this consistently, and your credit standing begins to strengthen.

In essence, microloans and digital lending provide Nigerians with a fast track into the formal credit system. But the system only works in your favour if you repay responsibly and use credit as a tool, not a crutch.

Role of credit cards and overdrafts

While credit cards are a common feature of financial life in countries like the United States and the United Kingdom, they remain relatively underutilised in Nigeria. Yet, they are among the most effective tools for building a strong credit history. Nigerian banks such as Stanbic IBTC, Access Bank, Zenith Bank, and Standard Chartered are increasingly offering credit cards to customers, usually pegged to salary accounts or sizeable fixed deposits.

The principle is simple: the bank gives you a line of credit, say N200,000, and expects you to repay either fully or in instalments at the end of each billing cycle. Each payment, whether made on time or late, is reported to credit bureaus, thereby shaping your credit profile. When used responsibly, spending within limits, paying bills before due dates, and avoiding unnecessary debt, credit cards demonstrate financial discipline and reliability to lenders.

Unfortunately, many Nigerians shy away from credit cards due to fear of debt or cultural distrust of borrowing. This avoidance, however, denies them one of the fastest ways to build a verifiable repayment history. Experts advise that rather than steering clear of credit cards, customers should embrace them cautiously: start with small purchases like groceries or fuel, repay consistently, and gradually expand usage. Even if the card is used sparingly, the positive repayment record can make a huge difference when applying for bigger loans, mortgages, or business facilities later on.

Overdraft facilities, which allow account holders to withdraw more than their available balance within an agreed limit, work in a similar fashion. A customer with an N100,000 salary account, for example, might be granted an overdraft of up to N50,000, which must be cleared within a given period. Regular use and repayment of such facilities also leave a trail of responsible borrowing that strengthens credit history.

In short, credit cards and overdrafts, when managed wisely, can serve as stepping stones toward greater financial opportunities.

Loan repayments and salary accounts

For many Nigerian salary earners, access to short-term loans and structured salary advances has become an everyday reality. These facilities, often provided directly by employers in partnership with banks, are not just a convenience; they are also an opportunity to build credit history. When an employee takes a salary advance and repays on time, it is recorded by the bank and often shared with credit bureaus, establishing a positive repayment pattern.

Structured loans, such as personal loans for rent, school fees, or household items, work the same way. Banks and microfinance institutions now provide consumer lending facilities that allow individuals to spread payments over months or years. Each successful repayment adds credibility to the borrower’s profile, while defaults can damage their chances of qualifying for higher facilities in the future.

Even simple financial activities like paying utility bills through a bank’s instalment plan or financing a gadget purchase can leave footprints in your credit history. For example, a young professional who finances a laptop through a structured payment plan and clears it on schedule will be more attractive to lenders when applying for a car loan or mortgage later on.

Experts further stress the importance of maintaining an active salary account. Banks closely monitor inflows, spending patterns, and account activity to determine whether a customer qualifies for a higher loan amount. A dormant or irregular account, even with a good income, may reduce eligibility. In contrast, a steady inflow of salaries, consistent savings habits, and disciplined loan repayments are clear indicators of creditworthiness.

The underlying lesson is simple: use salary accounts actively, borrow responsibly, and pay back consistently. Over time, these patterns create a strong financial profile that opens doors to better financial products.

Monitor your credit report

Another step often overlooked is the importance of checking your credit report regularly. Every Nigerian is entitled to at least one free credit report annually from licensed credit bureaus such as CRC Credit Bureau, FirstCentral, and CreditRegistry. Accessing this report allows individuals to track their financial standing, correct errors, and ensure their names are not mistakenly flagged for defaults or fraud-related issues.