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Your credit score in Singapore is important because it plays a great role when you’re applying for a loan and if you’re working in the financial industry.
If you’re planning to have a career in finance, your credit score plays an even greater role than before. As announced by the Monetary Authority of Singapore (MAS), financial institutions will conduct checks on employees’ and potential hires’ credit profiles.
Secondly, a credit score will affect your loan application results. At one point or the other, you may need to take a loan to buy a house or car or get a credit card to meet other needs. The lender takes a lot of factors into consideration before lending you the money. One of the main factors is your credit score.
How important is a credit score? How can you obtain a credit rating of AA or BB? It can influence not only whether you are approved for a car or an apartment loan, but also the interest rate on your credit card or the mortgage rate. The higher the score, the better. This article discusses everything you need to know about your credit score. We will provide you with additional information on the significance of managing one’s credit score, how it affects your life, and how to improve it quickly.
What Is A Credit Score In Singapore?
A credit score is a four-digit number that is calculated using your credit history. Lenders use the credit score to evaluate how risky it is to lend to you. The credit score number is calculated from financial records and reports.
A high credit score is an indication that you manage your finances well and pay your debts on time. In Singapore, the credit score ranges from 1000 to 2000, with 2000 being a high score. On the other hand, a score of 1000 is considered low, and you are a risky borrower. Below are the credit score risk grades in Singapore.
| Rating | Score | Probability of Default |
|---|---|---|
| AA | 1911 – 2000 | 0 to 0.27% |
| BB | 1844 – 1910 | 0.27% to 0.67% |
| CC | 1825 – 1843 | 0.67% to 0.88% |
| DD | 1813 – 1824 | 0.88% to 1.03% |
| EE | 1782 – 1812 | 1.03% to 1.58% |
| FF | 1755 – 1781 | 1.58% to 2.28% |
| GG | 1724 – 1754 | 2.28% to 3.48% |
| HH | 1000 – 1723 | Over 3.48% |
The highest credit score grade is AA. If your score shows BB & CC, it’s an indication of late payment, while D and below show delinquency.
How Do I Check My Credit Score In Singapore?
You can check your credit score with the credit bureaus in Singapore. The Monetary Authority of Singapore has authorized two credit bureaus to issue credit scores and reports.
The two bureaus are as follows:
1. Credit Bureau of Singapore
2. DP credit bureau
These institutions are allowed to track your financial history and compile a report. The compiled details, such as
- Loans you have taken
- Repayment history
- Credit inquiries you make to lenders
- Loan balances
Based on these details, the bureaus issue a credit score. The score gives a prospective lender an idea of the kind of borrower you are and how likely you are to repay the loan.
To get the credit reports and scores, you can request a soft copy or a hard copy through the post. It will cost you $6 (inclusive of GST) for the report. If you want the report delivered in different modes, you will have to pay an additional $2.
Is My Credit Score Good Or Bad?
The status of a credit score depends on the lender. While 1000 is generally considered a low credit score, how good or bad a credit score is depends on the lender. One lender may require a certain credit score while the other is OK.
A licensed moneylender may be more lenient than a bank in Singapore. A bank may not accept a low credit score and you may be rejected for your personal loan application. Licensed moneylenders are more flexible and may offer you a loan instead.
To avoid challenges when borrowing, it’s best to ensure you maintain a healthy credit score. It shows you can manage your finances well.
How Does My Credit Score Affect My Loan Eligibility?
The credit score shows your ability to pay debts. The higher the credit, the better, as it indicates you are capable of managing debts. It gives the lender confidence that you will repay the money you borrow. It makes it easier to get credit from the bank.
A poor credit rating will affect your ability to get loans from banks and financial institutions. The lender avoids lending to someone with a poor rating as they are a risky borrower. Other effects of a credit score are as below.
- Lenders offer terms and conditions based on the credit rating. This includes interest and payments.
- Increase the chance of getting your loan approved by the financial institution.
- Employers consider people with a higher credit score
- Your loan applications are likely to be approved quickly if you have a good credit score.Lenders are likely to approve higher loan limits if you have a good credit rating.
What Affects My Credit Score?
There are several factors that the credit bureau in Singapore considers. Below are some of the factors the bureau considers when determining the credit score.
1. Loan usage
The use of the loan facility affects your credit score. Your usage pattern affects future loan approvals. The credit bureau in Singapore will look at the type of loans taken or what the loans were used for.
2. Recent credit
When generating your credit report, the bureau will consider your recent credit history. Lenders will consider the number of credit facilities you have before they can approve any new credit.
3. Credit payment history
Your credit history will show how reliable you are as a customer. If you have missed any repayments, made any late payments, or failed to pay, Poor credit history reduces the confidence of the lender.
4. Credit account history
Lenders will check your account history to determine if you manage your finances properly. Your account history will show reliability and boost your credit rating. Some borrowers will end up with a poorer credit score due to mismanagement of their credit card debt.
5. Inquiry activity
If you apply for credit multiple times, the lender inquires with the credit bureau. Many inquiries show you are facing financial difficulties, or you are taking more than you can handle. This will result in a drop in your credit.
How Do I Improve My Credit Score Or Maintain It?
The credit report you will receive from the credit bureau shows your history. This means you can improve your credit in the coming months. Here are five ways to improve and maintain a good credit score.
Tip 1: Repay your loans on time
Don’t wait for that reminder to pay your debts. Instead, pay your debts early enough. In case of an emergency and you are not able to pay the loan, inform the lender. Speak to the money lender if you feel you will not be able to honor the terms stated.
Seek an alternative repayment schedule. Debt restructuring or debt consolidation will help manage your debts and improve your credit rating.
Avoid inquiring about multiple loans within a short period. Avoid making more than one loan application at a time. This will show you are struggling or that you are credit hungry. Lenders will lose confidence in your ability to manage your finances.
Tip 2: Limit the number of open credit facilities
Avoid having more than three credit facilities. You are likely to confuse the cycles and miss the payment. For instance, if you have more than five credit cards, you might forget to pay one, and that will result in a poor credit rating.
Close off credit lines that you no longer use. Minimize the number of credit lines you have for ease of management.
Tip 3: Don’t default on loans.
Any default on loans appears on your credit immediately. A major default can result in credit denial when you need it the most.
Tip 4: Consolidate your debts.
If you have multiple debts, consolidate them. Rolling all the debts into a single one will make it easier for you to pay. Consolidation is especially helpful if you have high-interest debts.
By consolidating the debts, you don’t have to deal with multiple creditors and payment cycles. You will have only one payment cycle to deal with, reducing the chances of default.
Tip 5: Pay off short-term loans first.
To repair your credit rating first, start by paying off short-term loans. This will go a long way toward repairing your credit quickly. Start off with something small, and reap the rewards in the long run.
Getting A Loan With A Poor Credit Score Is Possible
Regardless if you need to apply for a loan or if you need a job in the finance industry, it is best to keep a healthy credit score. Check your credit score in Singapore and if needed, utilise the above tips to improve your credit score.
As mentioned above, there are a few key things you can do to improve your credit score quickly. First, make sure you keep updated on your payments and don’t let any delinquencies happen. Second, try to pay off your debts as soon as possible. Third, avoid opening new lines of credit unnecessarily. By following these tips, you can give your credit score a boost in no time.
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