Credit score is probably one of the most important concepts when it comes to your financial health and life in general. This is because every bank you go to when looking for credit, from personal loans to car financing, will first check your score. Now, even telephone companies are using credit scores to determine whether to approve or decline phone contracts.
The bottom line when it comes to credit scores is to try and have the highest score, but how can one achieve that? Keep reading to understand more about credit scores in Singapore and useful tips to help you improve them.
A Closer Look at Credit Score: What are the Main Benefits?
A credit score is a number that is used to represent your credit risk or the probability that you are likely to pay your credit/bills on time. The number is calculated with information gathered from financial and credit reports, including payment history and present debt. If your score is high, it is an indication of responsible credit behaviour in the past, making potential banks have confidence that you will pay their money on time. Other benefits of having a good credit score include:
- Having a good score can help you get more favourable terms and conditions for credit. This may translate to lower payments and interest rates on the borrowed amount.
- You raise the chances of getting your loan approved by banks. If you have a good score, more banks will hold the view that you are responsible and approve your loan. However, those with poor scores are likely to get their applications declined.
- When seeking employment, especially in the financial industry, most of them only take people with a high credit score. The players believe that for you to be able to tell their clients about the importance of credit score, yours must also be impressive.
- Your loan applications are likely to be approved faster compared to those of people with a low credit score. This implies that even when you are facing an emergency, you are likely to get loans approved fast.
- Loan providers will be willing to approve more money to lend you. If you need to borrow a lot of funds to finance a major purchase, be it a car, property, or emergency, most banks will be willing to release the cash to your account because you are creditworthy.
Special Tips to Increase Your Credit Score
As you can see, there are so many benefits of having a good credit score. So, if your score has taken a beating because of whatever reason, the good news is that you can improve it using the following methods:
Make Sure to Always Repay Credit on Time
If you have a loan, be it a personal loan or renovation loan, late payments are likely to erode your credit score. By the time you get a second and third reminder about late loan repayment, the chances are that your credit score will have been impacted negatively. Therefore, you need to plan well to ensure that payments are made on time to maintain a good score.
In the event that you might not be able to remit the payment on time, it is crucial to inform the bank early enough and say when the payment will be made. For example, if you are informed that your salary will be delayed this month, make sure to notify the bank immediately. If there are changes in your payment schedules, such as your salary getting shifted from 1st of every month to 10th, ask the bank to restructure the debt.
Avoid Making Multiple Loan Enquiries
When calculating people's credit scores, advanced algorithms are used to capture even minor details to try and get the actual state of your creditworthiness. Therefore, when you make multiple loan applications, you are likely to be labeled as credit-hungry. It is a common behaviour for someone who is in financial trouble. Therefore, try as much as possible to avoid making multiple applications within a very short period.
Keep the Number of Open Credit Facilities Low
One of the main components used to calculate the credit score is the credit mix. You should have a good credit mix, but the number of open facilities should be kept low. At any moment, you should avoid holding more than 4-5 open credit facilities because too many of them can confuse the billing systems and cause missed or delayed payments.
You should also consider closing the credit cards that are not in use to save you cash on annual fees. When it comes to personal lines of credit, it is not advisable to maintain more than one. Indeed, do not hesitate to replace the current one if you get another with lower interest rates.
Consider Consolidating Your Debts
If you have multiple debts, especially high-interest ones, it can be tough to meet the requirements for all of them. With some requiring payment early in the month and others much later, there is a danger of missing some of them. One of the impacts of such delays or missed payments is likely to be a poor credit score. However, there is a way out – debt consolidation in Singapore.
Debt consolidation plans mean that you roll all the current debts into a single loan. You are simply taking a loan to pay all the existing unsecured loans so that you will ultimately have just one loan. This means that instead of dealing with multiple creditors or risking missed payments, you only have to deal with one creditor.
Immediately you take the loan, the credit score is likely to drop because you are adding a new line of credit. However, it will start improving in the subsequent months as the cleared loans are factored in the credit report. As the credit score improves, consider asking your bank for refinancing to enjoy an even lower interest rate. To consolidate your loan, visit Lendela to make your application to different banks and financial institutions.
Correct Possible Errors on Your Credit Report
Credit Bureau Singapore uses the information gathered from other organisations, including banks and online financial institutions, when calculating your score. While they try to ensure your information is as accurate as possible, it is not uncommon to get errors, perhaps because of incorrect entries or missed figures. Think of a situation where you cleared a loan on time, but wrong information is entered into the system, resulting in a lower credit score.
To have the issue addressed, you should get your credit report and check it closely to see whether it contains errors. If it does, have the errors corrected immediately to improve your score. Indeed, it would be an excellent idea to check your report and have the error corrected before applying for a loan.
Consider Using Credit Monitoring Services
We are living in the digital age where cyber fraud has become way too common. Therefore, it pays to be on top of the game when trying to improve your score or maintain it at the best level. One way of doing this is to use credit monitoring services, which help monitor changes in your credit report. For example, you can follow the paid-off accounts or the recent ones that you have opened.
The credit monitoring services can help you to identify fraud or identity theft on your card and stop it. For example, if a cybercriminal has managed to access your credit card account and is trying to use it, you get an immediate alert. If the criminals manage to borrow money or use a credit card, it can easily damage your credit score. So, contact the credit card company immediately when you get the notification so that all transactions are halted.
Why You Should Use Lendela to Apply for Loans
Now that we have demonstrated the importance of having a good credit score, it is time to get down and work on it. When it comes to applying for a loan in Singapore, it will be a good idea to get help from a loan comparison site such as Lendela, because they help simplify the process and allow you to select the loan with the best terms and conditions. Why try making dozens of applications when one can be enough with Lendela? Here is how it works:
- Visit Lendela website to submit a short application. This should take you a couple of moments.
- Get offers from different banks and financial institutions.
- Check the offers to identify the one with the best terms and conditions.
- Sign the loan agreement and get the cash deposited into your account. If the money was for home renovation, it would be sent to the contractor.
Having a good credit score should be every person’s goal. So, when you get that loan approved through Lendela, it is crucial to start repaying it as detailed on the loan agreement. If your credit score improves with time, you can even ask the bank for refinancing to enjoy lower interest rates.
NOTE: Improving your credit score can be challenging and lengthy. Therefore, try to avoid anything that can tear it down again after reaching the targeted score!