Credit Bureau Singapore (CBS) and Moneylenders Credit Bureau (MLCB) collect and manage consumer credit data. They give every Singaporean consumer a credit score that indicates the likelihood of you going into default. Your credit score is important and will follow you throughout your life, playing a vital role in a lender’s decision to offer or sometimes deny you credit.
You can find your credit score for free by going to Credit Bureau Singapore and requesting a report on your credit history. The score will be between 1000 and 2000 and will be accompanied by a score (ie AA or HH). Those who fall below 1,723 are placed in the lowest category and are considered to have a bad credit score.
|Credit score||Risk level||Probability of default|
|1911-2000||AA||Min 0.00%, Max 0.27%|
|1844-1910||BB||Min 0.27 percent, Max 0.67 percent|
|1825-1843||CC||Min 0.67%, Max 0.88%|
|1813-1824||not a word||Min 0.88 percent, Max 1.03 percent|
|1782-1812||EE||Min 1.03 percent, Max 1.58 percent|
|1755-1781||FF||Min 1.58 percent, Max 2.28 percent|
|1724-1754||GG||Min 2.28 percent, Max 3.46 percent|
|1000-1723||HH||Min 3.46 percent, Max 100.00 percent|
If you have bad credit or are looking to improve your credit score for a future loan, here are five tips you need to know.
1. Build a credit history and pay on time
Lenders will generally decline a credit card or loan application when there is little or no credit history. It is difficult to analyze a candidate when there is no background to examine. In contrast, a consumer with a long credit history is generally considered to be a more reliable borrower (in the absence of meaningful data on delinquency).
If you find yourself in this camp, the first thing to do is open a line of credit. There are many great credit card options available in Singapore to help you build your credit. You will quickly see your credit score improve when you use your credit card responsibly and pay your bills on time.
2. Avoid default at all costs and pay your debts on time
Delinquency data or late payment indicators in your credit history will penalize your score. That being said, defaulting on a loan can be one of the most damaging actions for your credit score. The impact of a single default on your credit score can make or break a lender’s decision to offer you a credit card, personal loan, or home loan. Not only that, you may be subject to higher interest rates on existing debt as well as any other fine print. So try to make payments on time.
If you are unable to pay off your debt, don’t ignore it. Enlist the help of a credit counselor to work with you to avoid making this serious mistake. You may be able to restructure your debt using a debt consolidation plan or a loan with balance transfer to avoid defaulting on a loan.
3. Try not to have too many or too few credit facilities open.
If you have little or no credit history, we suggest that you start applying for a credit card. However, try not to have too many credit facilities open at the same time. It is difficult to keep track of and manage many different credit cards in your wallet. So to avoid payment default and mismanagement of your payment deadlines, aim for 4 to 5 bank cards maximum. You should also consider closing unused credit cards, starting with the cards with the highest interest rates and annual fees.
4. Survey data
One way to penalize your credit score is to take out multiple loans over a short period of time. This behavior signals to lenders that you are in desperate need of credit and that you may be in a bad financial situation. Essentially, every time you apply for a new loan, a bank or financial institution requests a copy of your credit report. This creates a new investigation into your credit history. Having too many inquiries at once tells lenders that you are trying to get into debt fast. This behavior will lower your credit score and may even prevent you from being approved for a loan in the future. Instead, lay out your loan applications and wait a few months before applying for additional credit cards or loans.
5. Don’t use credit cards to the max
Your credit usage pattern is basically a ratio of your total amount due / total available credit on a recurring basis. Most credit cards have a credit limit, but that doesn’t mean you need to regularly maximize what you have. Avoid using more than 30% of your available limit to indicate a healthy credit usage pattern.
Conversely, if you regularly maximize your credit limit and use high credit usage, you will quickly see your credit score drop. Using credit plays a bigger role than you might have guessed when determining your credit score. If you end up with unfavorable usage patterns and your credit score suffers, adjusting your monthly spending habits can be a quick way to improve your credit score.