A credit report is essentially a financial health check. It contains your credit score, which indicates whether you’ve been naughty or nice with your credit card bills and other debts. Moneylenders, whether banks or government agencies, use your credit report to determine whether or not you are likely to repay your debts. In this blog, we tell you about credit score in Singapore and how you can improve it.
A credit score is a four-digit number that ranges from 1000 to 2000 based on your past payment history on loan accounts. It indicates the likelihood that you will default on your loan (i.e. fail to repay). If your credit score is close to 2000, you’re in good financial shape. With a low risk of default. If your credit score is close to 1000, it indicates that you are more likely to miss a payment. To determine your credit score, you must obtain a credit report from the Credit Bureau Singapore.
How Do I Obtain a Free Credit Report?
The simplest way to obtain a credit report is to purchase it directly from Credit Bureau Singapore (CBS). It costs $6.42 and can be paid for with Visa, MasterCard, or eNETS. You can also get it for free if you apply for a new credit card or loan with any CBS member (which most major providers are). The provider will send you an email informing you whether your application was approved or rejected. In either case, the letter will include instructions on how to obtain a free credit report from CBS within 30 days.
Is a Good Credit Score in Singapore Necessary?
Yes! Banks will use your credit score to determine how likely you are to repay your debts. So, if you intend to borrow from a bank, such as when you take out a home loan for a property purchase, you must ensure that your credit score is in good standing. The same is true when applying for an HDB loan. If you are not a full-time employee who makes regular CPF contributions, HDB will review your Credit Bureau Singapore credit report. Before issuing you the HDB loan eligibility letter, they will need to assess your ability to service your loan (HLE).
Your credit score is also important if you plan to apply for any type of credit or loan, whether it’s a new credit card, a renovation loan for your new home, or an education loan. Some employers, particularly those adhering to MAS’ Fit and Proper Guidelines, conduct pre-hire employment checks with CBS. As a result, the hiring manager’s decision to hire you may be influenced by your credit history.
How is Your Credit Score Calculated?
CBS computes your credit score by running an algorithm against your current credit data. Your credit score is not a fixed number. It may be updated from time to time to reflect any new credit activity. These are the major factors that will have a negative impact on your score. It is important to note that there is no set weightage for each factor and how much impact it has on the score.
- Inadequate credit history: You lack sufficient credit history to establish a good credit score.
- Exposure to credit: The greater your borrowing, the greater your credit risk.
- Presence of delinquency: Any criminal or delinquent activity will have a negative impact on your credit score.
- There isn’t enough clean history: a lack of a favourable loan history (repaying in full and on time)
- Bad credit history: Existence of a bad loan history (late or incomplete repayments)
- There are far too many inquiries: The frequency and timeliness of your loan applications are also factors.
How long Does it take to Improve Your Credit Score in Singapore?
If you have overextended yourself and your credit history has been harmed by recent late payments, you may be wondering when your credit score will improve. The good news is that you have the ability to improve your credit history! You should do the following:
- Always pay your bills on time.
- Maintain at least one active credit card.
- Applying for too many credit cards or loan facilities in a short period of time should be avoided.
If you do not already have an active credit facility, you should apply for one to begin building your credit score. Make timely payments, and you’ll be well on your way to improving your credit score.