How Can I Improve My Credit Score Quickly? No Bad Credit?
July 11, 2022
If you’re planning to buy a house, a car, or study at a university in Singapore, chances are you will need to take a loan.
Did you know that for you to be able to take a loan for big-ticket items, you need a good credit score? Credit scores are determined by Singapore’s credit beaure. Taking on a loan is not necessarily a bad thing. It is almost impossible for anyone to make full payment for their house or car in cash. Furthermore, some homeowners may prefer to use their CPF for these purchases.
Whether you get approved or rejected for your loan actually depends on your credit score. Your credit score (which is set by the credit beaure) is the first thing banks and licensed moneylenders look at when they receive your loan application.
For some, they might have accidentally damaged their credit score. Perhaps it was credit card debt or a missed repayment. It can feel like your bad credit history is following you around like a dark cloud. You’re not alone, though. Millions of people have struggled with bad credit at some point in their lives. Not to worry, there are ways to improve your credit score.
Improving your credit score doesn’t have to be complicated. You can do many things to improve your credit score quickly, even if you don’t have any recent loans or no credit at all.
Understand Credit Scores and How They Affect Your Loan Applications
What is a credit score?
Credit scores are like a report card for your financial history. They show lenders how responsible you’ve been in the past with repayments, thus giving them an idea of whether or not you’re likely to repay a loan in the future.
- The higher your credit score, the more likely you will be approved for a loan with favourable terms.
- A bad credit score, on the other hand, can make it challenging to get approved for a loan at all.
Credit scores are important, but they’re not the only factor lenders look at when considering a loan application. Be sure to have a solid overall financial profile before applying for a loan. That way, you’ll be in good shape no matter your credit score.
How do I check my credit score in Singapore?
How do I check my credit score in Singapore? There are a few ways to check your credit score in Singapore.
- Use a credit monitoring service such as Credit Sesame or Experian. These services will provide you with regular updates on your credit score, as well as information on what factors are impacting your score.
- Request a copy of your credit report from the major credit bureaus in Singapore: Equifax, Experian, and TransUnion. You can contact the bureau directly or by visiting their website.
- Check your credit score for free through the government-run Credit Bureau Singapore. Simply log in with your NRIC number and date of birth to access your report.
Regardless of your chosen method, it’s essential to keep an eye on your credit score to make informed financial decisions.
Is My Credit Score Good Or Bad?
In Singapore, your credit rating reflects your financial health and can affect your ability to borrow money, get a job, or even rent an apartment. The credit score range in Singapore varies between 1,000 and 2,000.
| Credit Score | Risk Grade | Probability Of Default (Min) | Probability Of Default (Max) |
|---|---|---|---|
| 1911-2000 | AA | 0.00% | 0.27% |
| 1844-1910 | BB | 0.27% | 0.67% |
| 1825-1843 | CC | 0.67% | 0.88% |
| 1813-1824 | DD | 0.88% | 1.03% |
| 1782-1812 | EE | 1.03% | 1.58% |
| 1755-1781 | FF | 1.58% | 2.28% |
| 1724-1754 | GG | 2.28% | 3.46% |
| 1000-1723 | HH | 3.46% | 100% |
Source: Credit Bureau Singapore
1. A good credit score means you’re a responsible borrower who will likely repay your debts.
2. A bad credit score means you’re a high-risk borrower and more likely to default on your loans.
So, what’s the difference between a good and bad credit rating?
A good credit score is BB or AA, or as close to 2000 as possible. This rating means you’re a low-risk borrower who will likely repay your debts on time. A bad credit rating is usually below DD. This score means you’re a high-risk borrower more likely to default on your loans.
How Does My Credit Score Affect My Personal Loan Eligibility?
A credit score is one of the most important factors lenders and lenders consider when evaluating a loan application. A high credit score indicates a history of responsible borrowing and repayment, while a low credit score can signal financial instability or even fraud.
As a result:
- Borrowers with high credit scores are typically eligible for lower interest rates and better terms.
- Those with low credit scores may only qualify for high-interest loans with disadvantageous terms.
- In some cases, borrowers with very low credit scores may not be eligible for personal loans at all.
If you’re unable to get the credit score you need, it might generate difficulties for your future. Hence, regardless if it is for a personal loan application, a home loan application or a study loan application, you should improve your credit rating.
How Do I Improve My Credit Score?
Before learning how to improve your credit score, you have to know what you’re getting into. What are the factors that influence your credit score?
Your payment history: Have you been punctual with your payments? Or have you missed a few? Timely repayments build up your creditworthiness.
1. Your credit utilization ratio
This is a measure of how much debt you’re carrying compared to your overall credit limit. The higher your ratio, the greater the risk you pose to lenders.
2. Your credit mix
Do you have a combination of different credit facilities? Having various accounts, including revolving and installment loans, can show lenders that you’re a responsible borrower. Just don’t have them all open at once!
3. Your existing credit history
Lenders often view borrowers with a long history of responsible credit use as less risky than those new to lending.
Fortunately, there are a few things that you can do to give your score a boost.
Pay all of your bills on time. This includes both your credit card bills and any other monthly payments that you might have. Late payments can stay on your credit report for up to seven years, so it’s essential to get into the habit of paying on time.
Next, you should also try to keep your balance low. When your credit card balances are high, it signals to lenders that you’re at risk of defaulting on your payments. Close any old accounts, especially if you’re no longer using them. Keeping those old accounts open shows you’re not paying attention to your finances.
4. Don’t send multiple loan applications at once.
That signals desperation. Instead, do your research thoroughly, shortlisting the right licensed moneylenders and financial packages for your needs. Apply for a loan only when you’re 90% sure you’ll get it. For example, you can apply for a payday or emergency loan if you don’t qualify for a larger sum.
5. Get a small loan or a credit card if you have no credit history
Just because you have never taken a loan doesn’t mean that you’ll be a low risk borrower. Your credit history’s length (and quality) affects your credit rating. That’s why it’s wise to build that history up.
What Happens If I Cannot Repay My Debt?
If you can’t repay your debt and owe more than $15,000, your lender can take you to court. If the court declares you bankrupt:
- Your assets will be seized and sold (except for your HDB apartment and CPF account).
- You’ll have to wire money monthly to the bankruptcy estate to pay your debt.
- This bankruptcy will be in your records for five years after clearing your debt.
What can you do if you cannot repay your debt?
- Try negotiating with your creditor for more time or a lower interest rate.
- Consolidate your debt.
- File for bankruptcy.
However, each option has risks and rewards, and it’s essential to choose the one that’s right for your situation.
If you’re unsure what to do, you can always consult with an experienced financial institution like GS Credit.
But whatever you do, don’t just ignore your debt and hope it will go away – that’s only going to make the situation worse. To apply for a personal loan with an understanding lender, click here.
Interested applicants can also submit their details via Singpass and complete the application in minutes!
Warning: Never do business with a loan shark, no matter how bad your debt or credit rating is.
