Few people in Singapore can afford to make big purchases in cash. For the bigger percentage of the population, the way to go is taking a loan. However, did you know that your credit rating affects your ability to get the loan application approved? Not to mention, when looking for a career, especially in a finance-related field, your score will be subjected to greater scrutiny. Let us go straight to the point: you need to improve your credit score to an AA rating or well above the 1911 mark.
There are many tips and strategies on how to improve credit rating in Singapore – and we will get into that in a moment – but nothing will boost the score faster than paying bills on time and using credit cards prudently. Keep reading to see the best strategies that you can adopt to boost your score.
What is Credit Rating?
A credit report is a bill of health showing the state of a Singapore resident’s financial health. On the report is a credit rating or score that indicates a person’s creditworthiness. A high credit rating, say AAA, indicates you are a low-risk party and, therefore, less likely to default repaying the loan advanced to you by a bank. The score is given as a four-digit number, ranging from 1000 to 2000. See the demonstration below:
If your score is closer to the 2,000 mark, your financial health is considered to be in the pink, with a low risk of default. The opposite is true if your score is low or closer to 1,000 points. To know what your score is, you need to obtain a credit report from the Credit Bureau of Singapore (CBS) by visiting their site and paying for it. However, you can also get it for free after applying for a loan facility or a new credit card.
How Credit Rating is Determined: What Causes Low Score?
When working on how to improve credit rating Singapore, you also need first to establish how it is calculated and what results in a low score. To calculate your score, here are the things that Credit Bureau of Singapore checks:
Credit Utilisation Pattern: What is Your Spending Activity?
This refers to how you have been spending credit. Here, banks will want to check whether there are sudden changes in your spending trends. If they notice changes, it is likely to act as a red flag that your financial health is getting poorer with time. In such a case, your application for a loan is likely to get declined.
Recent Account Activity
Are the offers from banks too attractive to avoid? It might be a good idea to hold on for some time because making multiple applications is likely to cast you in a bad light. Credit bureaus consider regular applications as over stretching yourself. Therefore, it is considered a red flag.
This is an indication of how you have been faring as a customer. When calculating your score, credit bureaus want to know things such as whether you have been making payments promptly for the existing credit facilities on time. For example, are you late in paying monthly instalments for your personal loans, from personal loans in Singapore to car financing?
Your Credit Account History
This factor targets to establish how your credit history has been. So, how has your relationship with financial institutions in Singapore been? Financial institutions in Singapore are very keen on your credit history and believe that if you defaulted paying previous debts, there is also a risk of defaulting even now.
This is the diversity of your credit accounts. The mix is very important because it helps banks understand how effectively you are able to manage different types of debts. This is why you should maintain several open financial accounts and use them prudently.
How to Improve Your Credit Rating in Singapore
Contrary to what some people believe, improving the score is not all that difficult. However, you need to have a high level of discipline and focus on the long-term. If the score is very low, thoughts of improving it rapidly in a few days or months might be disappointing. So, make it a process and ensure to protect every gain achieved along the way. Here are some expert tips on how to improve credit rating in Singapore.
Correct Possible Errors in Your Credit Report
To calculate your score, credit agencies rely on the numbers they get from third parties, such as banks, insurance firms, and other utility service providers. Therefore, it is not uncommon to see your score being low because of missed or wrong entries. Think of a situation where a bank omits some of the details about your cleared loans. The effect is likely to be a poor score because of wrong information. Having such errors, if they are there, rectified can help to improve the score significantly. Indeed, it is a good idea to check your report every time you are applying for a loan in Singapore.
Pay Your Outstanding Debts
The outstanding debts on your credit report can greatly harm your score and you should focus on clearing them fast. If there are many and you are finding it challenging to stay on top of the repayment schedule, a better alternative is taking a debt consolidation loan. This means you roll all the current unsecured loans into a single debt that is easy to manage. Although the debt consolidation loan will first push down the score because it is another line of credit, the effect will be felt starting a few months down the line.
When selecting a debt consolidation plan, go for the credit that comes with good terms. This means a plan that helps to push the overall cost of debt down with a significant margin. One way of pinpointing such a loan is using Lendela.
Avoid Making Multiple Loan Inquiries in Rapid Succession
When you make multiple financial loan applications, say more than three in a short while, the reflection created on the report is that of a credit-hungry person. It is a behaviour that is common to a person in financial distress. If you want to identify and apply for specific credit, such as cheap loans in Singapore, consider using loan comparison sites. The lovely thing about these comparison sites, such as Lendela, is that they are easy to use and free.
Repair Damaged Credit History with Short-Term Loans
If your credit score is damaged by poor credit history, improving it will require looking for unique ways to bridge the gaps. One way of achieving this is taking short-term loans in Singapore and repaying them on time. For example, you can take a loan to repay in six, nine, twelve, or 18 months. As you clear these loans, credit bureaus will see the progress and revise the score upwards.
Manage Your Credit Cards Diligently
When dealing with credit cards, you need to be smart. If you only pay the minimal amount on your credit cards every month, there is a risk of the interest pilling up rapidly. Again, missed payments can pull down the score. To use the cards to build your score, it is advisable to pay the balance in full every month.
Another important aspect of credit cards is managing the exposure diligently. So, avoid having many credit cards because they can be challenging to manage. If you fail to use the cards, they create the impression that you can easily become indebted.
Why You Should Make Loan Applications through Lendela
As you embark on the important journey of improving your credit rating, do not shy away from credit. Indeed, credit can be an important cog in your efforts to improve the score. For example, you might want to take a loan and pay it on time to progressively build a positive history. To increase the chances of your loan application approved and low-interest credit in Singapore, the best method is using loan comparison sites, such as Lendela.
Lendela partners with banks and financial institutions and was created to simplify the process of loan applications for Singaporeans. Once you submit an application, we use advanced algorithms to help match your profile with banks and financial institutions who are likely to approve your loan. Here are the four main steps involved when applying for a loan in Singapore, via Lendela.
Visit lendela.com to submit a short loan application (this takes only a few minutes)
The application is forwarded to different banks and financial institutions who return with pre-approved offers
Review the offers to pick the preferred one – then, you will be able to book an appointment with the selected bank
Sign the loan agreement and the money is deposited in your account
Your credit rating is one of the most important things in your financial health. Using the strategies we have listed above, you can progressively improve your score and reach AA rating. Also, ensure to use Lendela always to pinpoint credit offered with good terms & conditions, and to simplify your application process.