How To Improve Your Credit Score Quickly In Singapore
Many people in Singapore earn an income that is sufficient to only cater for monthly expenses, with little left over for savings.
Hence, it can be difficult to afford high-value assets or unplanned high expenditures.
If and when the need arises, getting a loan to finance such big-ticket purchases becomes the only way out.
But did you know that your credit score in Singapore can determine if your loan application is successful?
This article will highlight why your credit score translates to the ability to repay your loan and how you can improve on it.
What Is A Credit Score?
A credit score in Singapore is a four-digit rating on the performance of your past loan accounts as far repayments are concerned.
The score ranges from 1,000 to 2,000 and indicates your likelihood of defaulting on a new loan.
A lower score closer to 1,000 suggests a higher risk of default, in which case lenders may decline your loan application.
A credit score that is edging towards 2,000 means your credit repayment history and financial health are good.
The scoring is determined by Credit Bureau Singapore (CBS) by collecting and aggregating borrowers’ loan information to create individual credit risk profiles that financial institutions can access.
How Can You Check Your Credit Score In Singapore?
There are two ways to check your credit score in Singapore. To retrieve your Singapore credit report, you can choose the free method or the paid option.
This method is widely used by people in Singapore to get to know their credit scores or ratings before they can approach lending institutions for loans.
All you have to do is to send your online request to CBS. The report will cost you about $6.40.
From 2016, if you are applying for a new loan in Singapore, your lender will have to provide you with a free credit report.
This is even if you had one provided within the last 12 months.
Whether your loan is approved or rejected, this credit report is provided to you. This initiative helps borrowers to check and verify their ability to pay.
It also enables them to verify the accuracy of the data provided in the credit report.
Is Your Credit Score Good Or Bad?
Financial lenders usually use your credit report to determine your financial health or ability to pay the requested loan amount.
As mentioned, your score is good if it is near 2,000, after which the lender will likely be willing to lend to you.
A bad credit score (that is way below 2,000) may discourage lenders or price the loan higher if they lend to you.
The below tables explain how good or bad your credit score according to Credit Bureau Singapore:
|Probability of Default
|1911 – 2000
|between <= 0.27%
|1844 – 1910
|between 0.27% to 0.67%
|1825 – 1843
|between 0.67% to 0.88%
|1813 – 1824
|between 0.88% to 1.03%
|1782 – 1812
|between 1.03% to 1.58%
|1755 – 1781
|between 1.58% to 2.28%
|1724 – 1754
|between 2.28% to 3.48%
|1000 – 1723
|between >= 3.48%
How Does Your Credit Score Affect Your Loan Eligibility?
There are several other factors lenders in Singapore consider when reviewing loan applications, including income and employment status.
Your credit score may be just one of them but it is a very important factor. If you have a good credit score, your application will get a chance for approval.
In addition, the amount you requested may not be adjusted downwards.
Another effect of your credit score is that lenders use it to determine how much interest to charge on loan.
If your credit score is low, your lender will likely charge you a high interest rate if they don’t intend to reject the loan application or ask you to provide collateral.
What Affects Your Credit Score?
If you are wondering why your score stands as it is, below are some of the major factors that affect your credit score.
Your previous loan repayment history plays a major role in Singapore’s credit scoring. Even a single missed payment affects your score negatively.
Your credit limit is based on your net income. The higher the outstanding balances, the lower your ability to service a new loan. Worse still is when one of your loans goes past its due date.
Length Of Credit History
This refers to the length of time you have been borrowing and the age of your newest credit and oldest credit account. The higher the average age of all your accounts, the higher your credit scores.
Having diverse forms of credit gives you a higher credit score than having one repeated facility over the years.
This is because it gives lenders a better understanding of how good you are at managing different credit products.
How Can You Improve Or Maintain Your Credit Score?
For purposes of your credit score calculation, your loan account repayment history is maintained on a 12-month rolling basis.
It’s therefore possible and easy to improve and maintain your credit score.
The following points will teach you how to improve your credit score for future borrowing.
By reducing your loans and credit card balances, you will be lowering your credit utilisation ratio.
This means your salary or business cashflow isn’t constrained by debt repayments. Hence, your credit score improves.
Clear Past-Due Payments
Paying up your past-due payments could prevent your credit score from worsening further.
The number of days the payment was past due is included in credit reports, so the longer the gap, the more negative the effect it will have on your credit ratings.
Limit New Loans
Every time you request a fresh loan, your credit report has to be retrieved. Every hard inquiry is also listed in your credit file for two years.
The lesser your loan applications, the lower the number of hard inquiries, and the sooner their impact will fade on your credit score.
It might be difficult to manage your debts if you are drowning in them. Worse, you may even make the monthly remittance late and end up paying hefty default fines.
All this will go on your report, so the best remedy is to consolidate the facilities into one or two loans.
Pay Your Utilities On Time
Utility providers also work with Credit Bureau Singapore.
Therefore, besides loans, you should ensure your monthly electrical and utilities bills are paid on time.
Verify Your Report
Lastly, once in a while, you can request your credit report from CBS to check and verify the information included.
Report any inaccurate information that appears in your credit file and have it resolved as soon as possible.
Make The Effort To Improve Your Credit Score
In general, lenders apply different standards when approving loans.
Sometimes if your credit score is good but your income isn’t sufficient, it may be more difficult for you to receive the whole loan amount you requested.
That said, a lender won’t approve your loan if your credit score is extremely bad, even if you have a good income, as this means there is a high chance you won’t be able to repay the loan.