Let’s face it. Living in Singapore is a costly affair. Whether you’re looking to purchase your own home, a car, or simply for other personal expenses, you’ll probably take up a loan at least once in your life.
This is why it’s important to ensure that your credit score is ideal enough for your loan to be approved.
A high credit score indicates that you are a low-risk borrower, which entitles you to reduced interest rates.
There are many ways to build and maintain a high credit score. In this article, we will discuss the basics of credit scoring in Singapore, how to check credit score Singapore and how long to improve credit score in Singapore.
What Is A Credit Score?
A credit score is a 4 digit number that lenders use to estimate how risky you are as a credit applicant based on your ability to repay your debts.
The lower the credit score, the less likely the individual is to get approved for a loan or line of credit. Similarly, the higher the credit score, the more likely the individual is to get approved for a loan or line of credit.
Credit reports and ratings are issued in Singapore by the Credit Bureau of Singapore and the Experian Credit Bureau.
How Is A Credit Score Calculated?
The Monetary Authority of Singapore (MAS) has allowed the following two credit bureaus to supervise and issue credit reports and credit scores:
- Singapore Credit Bureau (CBS)
- Credit Bureau DP
Furthermore, a grading system assigns “AA” to people with a strong payment history and “HH” to those with poor payment history.
|Probability of default
|0.00% - 0.27%
|0.27% - 0.67%
|0.67% - 0.88%
|0.88% - 1.03%
|1.03% - 1.58%
|1.58% - 2.28%
|2.28% - 3.48%
|3.48% - 100%
In Singapore, financial institutions pool consumer credit history data, aggregating that information.
A score approaching 2000 indicates to banks and financial institutions that you are likely to be capable of repaying debts on time. In contrast, credit ratings below 1000 imply a significant likelihood of late loan payments or unpaid debt.
How Do I Check My Credit Score?
You must request a Singapore CBS report to examine your creditworthiness. You may choose between
- Online request for a soft copy
- Request a hard copy at SingPost Branches Islandwide, CrimsonLogic Service Bureau or Credit Bureau (Singapore) Office.
Price: $6.42 (inclusive of GST). You can opt to pay via VISA, MasterCard or eNETS.
For an additional administrative fee of $17.12, you can pick up your report within 2 hours at any SingPost location.
Where Can I Receive My Free Credit Report?
You can get a free credit bureau report if you apply for a new credit card or loan facility with any CBS member. The supplier will send you a message informing you whether or not your application was accepted. In either case, the letter will include directions on obtaining a free credit report from CBS within 30 days.
What Are The Factors That Will Affect My Credit Score?
Many factors will affect your creditworthiness, including:
Your Payment History
This is an important factor in your creditworthiness. Lenders need to see that you have a track record of making on-time payments and they will use your payment history to calculate your creditworthiness.
Your credit score will suffer in case you have a history of late payments. However, in case you have a history of making on-time payments, your credit score will improve.
Credit exposure is the amount of your available credit. It includes revolving credit, such as credit cards, and instalment credit, such as auto loans. A high credit exposure may indicate to lenders that you’re a riskier borrower, which could lead to a lower credit score.
Your Credit History’s Duration
The longer you’ve been using credit, the better. A long credit history shows lenders that you’re a responsible borrower with a track record of making on-time payments.
A high utilisation pattern can hurt your score because it signals lenders that you’re more likely to default on your loan. Utilising your credit wisely will help you maintain a high credit score and keep access to the best rates and terms on loans.
Delinquency is a debt that is past due by more than 30 days. If you have any delinquent accounts, they will be reflected on your credit report and can harm your credit rating
Inquiries for New Credit
Too many hard inquiries signal lenders that you are in financial distress and may increase the risk of defaulting on a loan. As a result, it is important to be mindful of how often you apply for new credit.
How Do I Improve And Maintain My Credit Score In Singapore?
Since credit reports contain information about your credit history going back a year, you can still raise your credit score by implementing the following habits over the next 12 months.
- Make sure that you always pay your bills on time.This is an important factor in your credit score and will significantly impact your rating.
- Try to keep your credit utilisation low. This is the amount of your available credit compared to the amount you use. Using a large amount of your available credit can signal to lenders that you are in financial distress and may be more likely to default on a loan.
- Only apply for new credit when necessary. Too many hard inquiries can hurt your score, so only apply for new credit when needed.
- Show that you manage your current credit exposure with minimal risk. This means maintaining a good credit history with on-time payments and low utilisation.
- Consider using a credit card responsibly to build up a positive repayment history.
What Are The Benefits Of A Good Credit Score?
There are many benefits of having a high credit score.
Better Rental Opportunities
A high credit score will improve your chances of getting approved for a rental property. Landlords frequently investigate potential tenants’ credit scores to gauge their financial responsibility.
Quick Approval Process
Banks and other financial institutions usually check applicants’ credit scores before approving. A high credit score makes you more likely to get a loan faster.
Lower Interest Rates
Those with good credit scores often get lower interest rates on loans and credit cards. Lenders see them as a lower risk and are more likely to approve their applications.
Larger Amount Loaned
Good credit scores can also help you borrow a larger amount of money. Lenders are more confident in lending money to someone with a high credit score, as they are less likely to default on the loan.
Lower Monthly Instalments
Not only will you be able to borrow a larger amount of money with a high credit score, but you’ll also have to pay lower monthly instalments. Lenders offer lower interest rates to those with good credit scores.
Related to this topic:
- What you need to know before applying for a loan in Singapore
- Where to find 24-hour licensed money lenders in Singapore
- Best Personal Loans in Singapore
Will A Poor Credit Score Affect My Loan Eligibility?
A poor credit score can significantly impact your ability to secure a loan. Many lenders use credit scores as one of the primary factors in determining whether to approve a loan application. A low credit score may indicate to a lender that you are a high-risk borrower, which could lead to your loan application being denied.
Additionally, even if you are approved for a loan with a poor credit score, you could be offered less favourable terms, such as a higher interest rate. As a result, it is important to improve your credit score before applying for a loan.
These are key things to remember when building and maintaining a good Singapore credit score. Of course, having a high credit score doesn’t happen overnight; it takes time, effort, and discipline.
If you find yourself requiring a personal loan while still building up your credit score, fret not. At Money Kinetics, we offer an array of customised personal loans to suit your needs. While you take time to improve your credit score, we can provide you with the financial help you need, every step of the way.
As an expert in personal finance and credit scoring, I have a comprehensive understanding of the concepts discussed in the article. I have a strong foundation in the financial landscape of Singapore and a depth of knowledge regarding credit scoring, credit reports, and their implications on various financial aspects. Here's an analysis and breakdown of the concepts covered in the article:
Credit Score Basics:
1. Definition of Credit Score:
- A credit score is a 4-digit number used by lenders to assess the creditworthiness of an individual based on their ability to repay debts.
- Higher scores indicate lower risk, leading to reduced interest rates.
2. Credit Bureaus in Singapore:
- Credit reports and ratings are issued by the Credit Bureau of Singapore and the Experian Credit Bureau.
- The Monetary Authority of Singapore (MAS) oversees the credit reporting process.
3. Credit Score Calculation:
- Two main credit bureaus: Singapore Credit Bureau (CBS) and Credit Bureau DP.
- The grading system assigns scores from "AA" for strong payment history to "HH" for poor payment history.
4. Score Ratings and Probability of Default:
- A detailed breakdown of scores and corresponding ratings, indicating the probability of default.
Checking Credit Score:
1. Obtaining Credit Reports:
- Request a Singapore CBS report to assess creditworthiness.
- Available through online requests or at designated locations for a fee.
2. Free Credit Report:
- Obtain a free credit report by applying for a new credit card or loan with any CBS member.
Factors Affecting Credit Score:
1. Payment History:
- On-time payments positively impact credit scores.
- Late payments can adversely affect creditworthiness.
2. Credit Exposure:
- The total amount of available credit influences credit scores.
- Higher exposure may suggest higher risk.
3. Credit History’s Duration:
- Longer credit history demonstrates responsible borrowing.
4. Utilization Pattern:
- High credit utilization may negatively impact the credit score.
5. Delinquency Presence:
- Past-due debts over 30 days are reflected in the credit report.
6. Inquiries for New Credit:
- Multiple hard inquiries may signal financial distress and increase the risk of default.
Improving and Maintaining Credit Score:
1. Paying Bills on Time:
- Timely bill payments positively impact credit scores.
2. Keeping Credit Utilization Low:
- Maintaining a balance between available credit and usage is crucial.
3. Limited New Credit Applications:
- Applying for new credit only when necessary helps avoid negative impacts.
4. Managing Credit Exposure:
- Demonstrating responsible management of current credit exposure.
5. Using Credit Cards Responsibly:
- Responsible credit card usage aids in building a positive repayment history.
Benefits of a Good Credit Score:
1. Rental Opportunities:
- Higher credit scores improve chances of approval for rental properties.
2. Quick Approval Process:
- Banks and financial institutions prioritize individuals with high credit scores.
3. Lower Interest Rates:
- Good credit scores lead to lower interest rates on loans and credit cards.
4. Larger Amounts Loaned:
- Higher credit scores increase confidence in lending larger amounts.
5. Lower Monthly Installments:
- Lower interest rates result in more manageable monthly payments.
Poor Credit Score Impact:
1. Loan Eligibility:
- Poor credit scores can impact the ability to secure a loan.
2. Terms and Conditions:
- Even if approved, less favorable terms may be offered with a poor credit score.
3. Importance of Credit Improvement:
- Improving credit score is crucial before applying for loans.
In conclusion, understanding and implementing these concepts are vital for individuals in Singapore to navigate the financial landscape, secure favorable terms, and improve their overall financial well-being.