It is true that you can survive with a poor credit reputation, but it is likely to be pretty difficult and expensive too. Instead, building a good credit score can help you to save money. Here are other reasons why you should use every effort to maintain a positive credit reputation.
You Get to Enjoy Low-Interest Rates on Credit
When you make an application for a loan, the first thing that lenders in Singapore check is your credit reputation. If the reputation is excellent, you will qualify for low-interest rates on loans. Therefore, it will be a good idea to ensure your credit reputation is good before applying for a loan.
Credit Reputation determines Your Chances of Loan Approval
One thing you need to appreciate about lenders in Singapore is that they are in business and do not want to deal with people who are perceived as risky. If it is a bank, risky clients are believed to raise the chances of growing bad debts. Therefore, if you have a poor credit reputation, lenders are likely to decline your application for credit. Even if your loan is approved, it is likely to attract high-interest rates.
Good Reputation Offers More Negotiating Power
When you have a good credit reputation, it provides leverage to negotiate for a lower interest rate on your loans or credit card. Think of a situation where a bank offers you a personal loan requiring you to repay with an interest rate of 5.5%. If you have a good credit score, it might be possible to ask the bank, “Look, my credit score is good, can you push the rate down a little?”.
However, you are not likely to be accorded this opportunity if the reputation is poor. See – why risk getting loans with very tough conditions, such as high-interest rates? Take your time to learn how to improve your score.
Credit Reputation Determines the Amount that You Can Borrow from Lenders
Did you know that your credit reputation determines the amount you can borrow from a bank? If you have a good credit reputation, most lenders in Singapore will be willing to lend you more. If, by chance, your loan application is approved when the reputation is very poor, the amount will be pretty low.
You can Qualify for a Phone Contract with No Deposit
Today, it is not just the lenders who rely on creditworthiness to determine the people they will work with. Most phone companies will check back on your credit reputation to determine whether to approve or decline your application for a contract. If your credit score is poor, most phone companies are likely to decline or require you to raise some deposit as a way of lowering the risk. However, you will be allowed to sign a contract without having to raise any deposit if the credit reputation is impressive.
Faster Approval for Rental Houses
Like banks and phone companies, real estate establishments in Singapore are also relying on credit reputation to screen tenants. If you have a bad reputation, especially one resulting from previous evictions or rental balances, the chances are that you will not be allowed into a rental apartment. This implies that a good reputation will make it easy for you to get a rental house in Singapore.
As you can see, credit reputation affects almost all areas of your life in Singapore, from accessing credit in a bank to getting a phone contract with telecom companies. Therefore, it is prudent to ensure the reputation is kept positive all the time, but what are the best strategies? In the next section, we will tell you how to improve your credit reputation.
The Best Ways to Improve Your Credit Reputation
To improve your credit reputation, there are a number of things that you can do, and we are going to list the main ones. Do not get stuck with a poor score; it is time to shake off the bad reputation and take control of personal finances:
- Correct Errors in Your Credit Report
To improve your credit reputation, the first step is ensuring that the information on the credit report is correct. If it contains errors, they are likely to affect the score and give the wrong position about your creditworthiness. So, start by visiting Credit Bureau Singapore (CBS) to get your report.
Although you expect the report to provide the right position of your credit reputation, the risk of errors always looms. Because CBS relies on third parties, such as banks, to gather information about your finances, late submission or omission can result in major errors. Therefore, it is important to carefully scrutinise the credit score report and have the errors, if any, corrected.
If you are planning to apply for a loan, phone contract, or looking for a new rental apartment, the first step should be getting the report and ensuring it has the right information.
- Maintain a Good Credit Payment History
To determine your credit reputation, CBS strongly relies on your credit history. If you rarely make on-time payments, the reputation is likely to be poor. To avoid this, you should budget your revenue well, factoring in all the debts, from credit cards to personal loans in Singapore.
- Consider Limiting the Number of Credit Cards
It can be tempting to have multiple credit cards, but following different balances and payment dates can result in confusion, especially if you also have other debts. If you get late with your credit card loans payment, they are likely to push down your reputation. Instead of having eight credit cards, consider working with one or two. Furthermore, you should target getting a good credit mix, from credit cards to personal loans and mortgages.
- Recover from Bankruptcy
Bankruptcy is one of the biggest obstacles to achieving a good credit reputation. Indeed, it is far worse than other factors, such as late payment and poor credit utilisation. The good news is that you can still overcome bankruptcy by repaying your debts and starting to build a positive repayment trend. However, this is likely to take some time.
This post has demonstrated that good credit reputation is one of the most important components in financial management. If the reputation is poor, things are likely to be very challenging for you in Singapore, but you can use the strategies we have listed above to improve it progressively.
When working on improving personal credit reputation and need to borrow money, such as personal loans, renovation loans or best car loan Singapore, you can always use Lendela to identify the lenders with better terms and conditions, such as low-interest rates. Do not try analysing all lenders in Singapore on your own because it can be challenging; Lendela is an easy, faster, and convenient method to identify the best.