How Loan App Defaults Affect Your Credit Score

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Mobile loan apps have made it easier for Kenyans to access fast cash, with billions disbursed each year. The convenience has supported millions during emergencies and daily expenses.

But loan app defaults in Kenya are rising quickly, and the consequences go far beyond temporary financial stress. Default rates climbed to 16.6% in 2024 from 10.7% in 2021, showing how many borrowers are struggling with repayment.

As of 2025, one in six adult borrowers faces default pressure due to economic challenges such as inflation and job losses.

Mobile loan apps operate within Kenya’s credit ecosystem under regulations issued by the Central Bank of Kenya (CBK) in 2022. They fall under the category of digital credit providers and are required to report borrower data every month to the three licensed Credit Reference Bureaus (CRBs): TransUnion, Metropol, and Creditinfo.

These CRBs collect borrowers’ records and generate credit scores, typically within a 300–850 range, alongside statuses labelled “Clean,” “Caution,” or “Negative.”

Loan app defaults affect your credit score more rapidly than most bank loans. Digital loans are classified as defaults once payments are overdue by 30 days, unlike bank loans, which have a 90-day period.

However, only defaults above KSh 1,000 are shared, shielding very small delays but increasing the impact for larger digital loans.

Once flagged, a default can lower your credit score by 100 to 200 points. This change commonly results in a “Negative” status, restricting access to loans, raising interest rates to about 20–30% APR, and reducing loan amounts approved by different lenders.

The trend shows considerable strain among low-value loan users. A September 2025 CBK report recorded an 83.1% default rate for digital loans of KSh 1,000 or below, while loans between KSh 1,000 and KSh 5,000 posted a 69.4% default rate.

These figures point to repayment problems at the lower end of the credit market where most mobile borrowing happens.

Loan app defaults affect your credit score, but they also influence life beyond borrowing. Some employers and landlords review credit reports before offering jobs or rental units.

Once listed, negative information stays on record for five years after the default is cleared, and even settled accounts remain tagged for 12–24 months. That history can limit eligibility for future credit and force borrowers into costly digital lenders, creating cycles of debt.

Borrowers also face emotional pressure. Although CBK rules prohibit harassment, there have been cases where borrowers receive repeated calls, texts, or even social media messages. These practices have resulted in regulatory fines and tighter enforcement, but many users still feel the stress during default periods.

Despite the consequences, recovery is possible. Borrowers can repay overdue loans through USSD, M-Pesa, or directly in apps. Lenders must update CRB records within 30 days after payment, and borrowers can dispute incorrect listings on CRB platforms.

To rebuild a positive record, borrowers can keep timely repayment habits on utilities and other products now included in credit reports. Platforms like Nipashe allow users to monitor their credit record and track score changes.

Jefferson Wachira is a writer at Africa Digest News, specializing in banking and finance trends, and their impact on African economies.