Maintaining a good credit score is essential, especially if you want your credit applications to be approved quickly and in full.
Your credit report from the Credit Bureau Singapore (CBS) is a record of your credit payment history consolidated from banks and major financial institutions in Singapore. CBS supplements it with publicly available information such as bankruptcy data and Debt Repayment Scheme records from the Insolvency and Public Trustee’s Office (IPTO) as well as Debt Management Programme information from Credit Counselling Singapore.
Is it accurate to say that a riskier credit score might affect the person’s chance of getting a loan in the future?
Many factors come into consideration when financial institutions make the final decision to grant or deny credit to consumers and your credit history is one of the tools used by lenders to assess your creditworthiness.
Delinquent payments or defaults can impact your creditworthiness negatively and affect your chances of obtaining credit as most lenders will check your credit file to assess your credit worthiness prior to making a decision. The higher the score, the lower the probability of an individual defaulting payment, hence a good credit repayment history makes it easier for one to obtain credit and qualify for loans.
By reviewing your credit report regularly, it allows you check that all information is current and clear of any inaccurate information.
While the credit assessment methods and risk appetites varies amongst the lenders, here are some of the factors which lenders look at when assessing credit applications:
1. How affordable is the loan for the applicant given his income and expenses?
2. What assets does the applicant own?
3. How does the consumer manage debt? What are his payment patterns?
4. How many active credit facilities does he have? What is his current total debt?
5. Does he have a record of bankruptcy proceedings or default payments?
What is a credit score?
A credit score is a number used by lenders as an indicator of how an individual is likely to repay his debts and the probability of going into default. CBS credit score is based on the many types of information in the credit report to calculate a number that estimates your level of future credit risk.
The score ranges from 1,000 to 2,000, where individuals scoring 1,000 have the highest likelihood of defaulting on a repayment, whereas those scoring 2,000 have the lowest chance of reaching a delinquency status.
Factors affecting your credit score
- Utilization pattern – This refers to the amount of credit owed/ used per account.
- Recent credit – Number of newly opened credit accounts. It is advisable to apply for new credit in moderation.
- Account delinquency data – Presence of delinquency (late payment) on your loan accounts will reduce your credit score.
- Credit account history – Accounts with a history of prompt payments will help to boost your credit rating.
- Available credit – This refers to the number of accounts available (open or active) for credit.
- Enquiry activity – Each time a potential lender pulls your credit report in response to a new credit application, an enquiry is placed on your file. Having too many enquiries in your credit report indicate to lenders that you are trying to take on more debt, therefore increasing your credit exposure.
How to improve your credit score
Here are some tips which you can adopt to enhance your credit reputation:
- Paying your bills on time and in full.
- Settle overdue/ outstanding balances and consider charging less.
- Avoid having bankruptcy and default information in your credit report.
- Limit the number of credit facilities you own. As long as you’re in credit repair mode, you should avoid making any new applications for credit since credit enquiries can hurt your credit score.
- Avoid applying for multiple credit within a short period of time. Applying for too many new credit applications within a short period of time indicates credit hunger and can have an adverse effect on your credit score.
- Dispute a credit report error. If your credit report contains errors, you are encouraged to write to CBS to rectify the inaccuracy. Erroneous data can hurt your credit score significantly.
- Be patient and persistent. Your credit score did not deteriorate overnight, so don’t expect it to improve within a short amount of time. Continue paying your debts regularly on time each month and over time you will see your credit score improve.
The fifth perspective
Much of modern life requires us to make purchases or financial decisions using credit. Almost all of us make use of credit when purchasing a home or car in Singapore. Therefore, a good credit score is like a financial lever that allows you to get better loans at lower interest rates. On the other hand, a bad credit score will cause you to pay more in interest or hamper your ability to secure loans.
If you have any queries on your credit report, you may contact CBS Hotline at 6565-6363 or email to seek clarification.
This article was written in collaboration with Credit Bureau Singapore.