Having a bad credit score is very common among Singaporeans. High costs of living coupled with unexpected expenses that arise on a weekly basis makes it hard to pay the monthly installments on time. Nevertheless, there are still times when you need to apply for loans be it for a new car or some urgent situations.
Therefore, it is vital to build your credit score long before you intend to apply for loans. As the saying goes, ‘Rome wasn’t not built in a day’. You have to take a few vital steps to remove the black marks on your credit report and become financially healthy. This is especially true during emergencies when you need personal installment loans that could help you through hard times.
Fortunately, there are many ways to boost your credit score in Singapore. The following guide would explain everything from the basics of a credit report to the best ways to get a perfect credit score.
What is a credit score / report?
In simple terms, a credit score indicates your financial health, or your ability to repay the loans once given. It measures the probability of you defaulting on a loan. In Singapore, only two credit bureaus are allowed to issue credit reports and they are:
- DP Credit Bureau
- Credit Bureau of Singapore
Both bureaus track all the different aspects of your financial history and come up with a detailed report of all the loans you have taken before, your repayment history and also the number of loan enquiries you made. Nevertheless, the more popular credit bureau is undoubtedly the Credit Bureau of Singapore.
With this, let us take a look at how does the Credit Bureau of Singapore’s scoring system actually works.
The CBS credit score provides a 4-digit number (not lottery) depending on your repayment history on all of your loan accounts. It ranges from a minimum of 1000 to a perfect score of 2000. A risk grade and probability of default also comes along with the score.
However, it would be important to note that your credit score is NOT THE ONLY FACTOR that financial institutions like banks or licensed money lenders would use to consider your loan application. With that being said, your annual income, your length of employment, outstanding loan amounts and bankruptcy information would also be taken into consideration.
Also, CBS does not blacklist or play a role in deciding if a loan would be approved. The credit score only act as factual supporting document for the financial institutions and lending decisions would be based on their policies.
**It is important to note that financial institutions rarely vary the interest rates based on your credit score. If you have a bad credit, they would simply give you a smaller loan amount or outright reject your loan.
The CBS credit score takes several factors into account including utilization pattern (outstanding amount), recent loans taken, late payment history, age of your account, available credit and number of enquiries made to lenders.
You could purchase your own credit report for a mere $6 from the Credit Bureau of Singapore.
How to improve your credit score?
1. Avoid several loan enquiries in a small period of time.
Did you know that all of the financial institutions would know how many times have you asked for a loan from different lenders? Each time a lender takes a look into your credit score, the request is recorded into the system.
If you apply for three or four loans from different lenders in a short period of time (i.e. one month), it would imply that you are “desperate” for a loan. It creates an impression that you are very hungry for credit and may take up more than one loan at the same time.
Although you may be just looking for the best deals in town, lenders would still have to protect their own interest and not take any risks from someone applying for multiple loans in a short period of time. It would also affect your CBS credit score.
Therefore, you should limit yourself to only two applications per month, period. Do not let them think that you are desperate. Another alternative is that you could use loan comparison sites or directories to find the average interest rates of the loans you are seeking for. After determining the best lenders, apply from the one you prefer the most and slowly move your way down if the lender rejects you.
2. Limit your credit facilities
Sure, it is good to have lot of credit cards, overdrafts or personal loans. However, it would be advisable to only keep a maximum of 3 cards or loans. The same goes to the number of financial institutions you engage with.
Why? Having several credit facilities would mean that there would be many different billing cycles. It would be hard to keep track of or even properly plan your money to pay for each of the bills. For example, you may have payments due on
3. Limit number of open credit facilities
In general, avoid having more than four to five credit facilities (personal lines of credit, credit cards, personal loans, and so forth). At any rate, it’s not advisable to hold six or seven credit cards or credit lines. You are likely to get confused by the various billing cycles and miss payments. For example, if you have payments due on every 1st, 12th, 19th and 23rd of the month, you would most likely miss out one or two in the long run.
Instead, close off all the credit cards that you are not using. Not only could you save on the annual fees, you would also less likely to be confused on the repayment dates. Yes we know that there are many benefits from different card but its just not worth the risk. Instead of getting points for rewards, its better to get higher CBS credit scores! (Just find the credit facility with the lowest interest rates, switch to it and close the rest.)
Remember, missing out on one single payment could seriously damage your credit score.
4. Take a short-term loan
As weird as it may sound, you could take a short-term loan to repair your bad credit. This is because lenders are generally more interested in your most recent repayment history. If you already have bad credit, it would be good to show the potential lenders that you are now financially responsible. This is especially important if you are planning to apply for a major loan (like a housing loan) in one or two years. Keep your payments consistent and you may get an AA grade on the CBS credit report!
Alternatively, settle your smaller loans ($1,000 and below), if you have any, as it would immediately give your credit report a much-needed boost.
5. Remove black marks on your credit report
Did you ever check your credit score before? Chances are, there might be some errors the report (i.e. incorrect records of missed payments or defaults). Even one incorrect record of missed payment would significantly damage your financial health. Therefore, it would be important to read through your own credit report to find any mistakes.
With a mere $6, you could purchase your credit report from the Credit Bureau of Singapore and check each of the following.
– Missed payments
– Payment defaults
– Overdue amounts
-credit infringements (where credit providers could not contact you for your loan)
-summons (where you are called to a court to settle a debt)
-bankruptcies or insolvencies
If you find any single mistake, you could file a dispute with the Credit Bureau of Singapore. Remember, just one negative record on your credit report would significantly affect your chances of getting your loan approval.
6. Always, always pay on time
There is nothing much to elaborate on this point as you would surely know that paying on time is the single most important way to build a healthy credit score. Always think before you spend. Don’t ever make impulse purchases no matter how attractive the marketing is. Don’t fall for “discount deals” as they are always around to manipulate your mind into purchasing that “once-in-a-lifetime” deal.
Plan a monthly budget and STRICTLY follow the budget. Think about your future and your loved ones. One irrational move may ruin your entire life and also the people around you. Take responsibility of your own life and your financial well-being. It would make a huge difference.
Money cannot buy happiness, but it would be difficult to be happy when you have to worry about how to pay your next installment.
With this, we wish the best for your life and future. At Singa Credit, we believe in genuinely helping people with financial woes. As a responsible lender, it is our duty to help you set a clear path to financial success. Talk to our financial consultants today and get free advise on how to manage your debts.