5 Tips for Improving Your Credit Score in Singapore
Credit score is a word we hear bandied around a lot in the finance sector, perhaps you’ve heard it in relation to procuring a credit card in a bid to go cashless, or if you have needed to borrow money for any reason. But what exactly is a credit score? How do we get one and where does it come from? And most importantly how can we improve it?
Credit scores debunked
In just a few words, your credit score is a rating that ascertains the likelihood that you will repay debt. If you ask to borrow money in the form of a credit card or bank loan, the bank or lender will use your credit rating to decide whether or not to offer you the cash.
The rating is based on data about your financial history. The higher the number, the better your standing and the more likely you are to be able to obtain the finance you need because the bank believes you are unlikely to default on your debt. Defaulting means that the bank is forced to write off the loan due to non-payment, which is, of course, something they want to avoid at all costs.
Your credit score will never factor in personal information, so your race, gender, religion, nationality or marital status have no standing.
Credit score in Singapore
Singaporeans have their credit score monitored by an agency called Credit Bureau Singapore. The company uses a proprietary algorithm that monitors your use of credit during your lifetime. You can obtain a copy of this report for S$6.
The grades in Singapore run from AA, denoting a score of 1911 – 2000 points suggesting the likelihood that you will default is less than 0.27% right through to the worst score HH, or 1000-1723 points suggesting there is a likelihood of 3.48% or higher that you will default on your payments. As a guide, you may have a B or C grade if you have made late payments on credit cards. D grades or lower will be caused by previous defaults.
How to improve your credit rating
Perhaps you want to get a mortgage, get a loan for a wedding, buy a car on finance or take out a loan for education or a business startup, you need to make sure your credit score is pristine as a priority. Here are five top tips on how to get a glowing credit report.
1. Check your report
Apply to obtain a credit report from Credit Bureau Singapore. Take some time to run through that report and make a note of any mistakes. It is not uncommon for transaction alerts or errors to crop up on reports which may negatively impact your score unnecessarily. Any issues you notice should be reported, a note will be added to your file that these are under dispute. Once they are corrected, you will instantly have an improved score.
2. Bills bills bills
One sure-fire way to improve your credit rating is to pay your bills on time. Missing a credit card bill payment is going to have a significant and long-lasting impact on your credit score, more than one and you are really getting into trouble. Pay your balance in full every single month without fail and not only are you saving yourself the ridiculously high interest rates, but you are building yourself a strong credit history as you demonstrate that you are a responsible spender with control over their finances.
A top tip here is to set up an automatic bank transfer to clear your balance every month, that way you don’t even have to think about it. Consistent, timely bill paying is the very best way to improve your credit score.
3. Good accounts
If you have several credit cards, all of which are in good standing, which means you pay the bills regularly and are not in any debt, this will improve your credit score. Part of this is making sure to consistently use and then pay off your credit cards. If you do not use your cards, the banks cannot assess whether you are a responsible user of credit, and this ‘insufficient credit activity’ is enough to stop some banks from giving you credit. It may seem strange, as surely the person who never uses credit cards is in the best financial standing possible, but in fact banks and lenders want to lend money to someone who can use credit and manage it responsibly, rather than someone about whom they have no data who may end up being inexperienced and reckless with their spending.
4. Avoid multiple applications
If you apply for a raft of new credit cards or loans within a short space of time, it may cause you to look unreliable which could seriously damage your credit score. Every time you apply for credit, the bank or lender will check your score and this goes on your record. It is worth keeping in mind that ‘enquiries’ as they are known, are kept on your report for two years from the date of enquiry. So before you apply for another credit card, cast your mind back to check when you last applied for credit.
5. Play the long game
In Singapore, if you default on your credit card payments it remains on your credit report for three years, if you file for bankruptcy this will be there for five years. If you are battling either of these past misdemeanours, it may feel like an uphill struggle. But by playing the long game and using the above tips consistently over many months you will eventually reach a score that will allow you to purchase your dream car, get a mortgage on your dream home or plan that huge wedding.
Check your credit report once a year, correcting any mistakes as they arise, avoid applying for credit multiple times and pay your regular but low balances on time every month and your financial future will look bright.
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