This is a guest contribution by Credit Bureau Singapore, as part of a partnership between CBS and AMTD PolicyPal Group (PolicyPal and ValueChampion), in line with our mission to empower people with financial knowledge and help them attain financial wellness.
Not many people can afford to pay for big-ticket expenses in cash; most people apply for loans. However, your ability to get a loan can be affected by your credit report, which is derived from your credit history based on data from a range of factors, such as your payment performance on existing loans, outstanding balances, and number of loan applications, etc.
Related: Why Is a Healthy Credit Score Important in Singapore and What Are the Benefits?
What Is A Credit Report?
A credit report is basically a record of all your personal credit facilities and total credit limit contributed by Credit Bureau Singapore’s (CBS) members, which include major credit card providers, retail banks, and financial institutions in Singapore.
Why is it Important?
- Lending Decisions: When you apply for a loan or credit card, lenders look at your credit report to decide if you’re a good risk. A positive report means you’re more likely to get approved and might even secure better interest rates.
- Renting a Home: Landlords can check your credit report to determine if you’re a reliable tenant. A good credit history can make house-hunting smoother.
- Employment Opportunities: Some employers check credit reports during the hiring process, especially for roles that involve financial responsibilities. A solid report can boost your job prospects.
Through this report, lenders can assess how well an individual can repay their debts based on a variety of factors including their credit score, total credit limit granted, number of credit facilities, and total outstanding balances. Your credit score is also presented in a credit report that summarises your credit payment history and other data in your credit report.
(At CBS, the credit scores are calculated from an algorithm based on information in an individual’s current available credit data. The score ranges from 1000 to 2000, with 2000 indicating the lowest likelihood of defaulting on a repayment and 1000 indicating the highest probability of default.)
In a nutshell, lenders use your credit report to assess your creditworthiness and determine your future loan repayment behavior—making this information crucial enough to affect your life (i.e. if you want to take up a loan). This is why maintaining a good credit report is important.
In simple terms, it tells lenders whether it’s a good idea to lend you money.
Related: How to Get the Best Credit Score to Apply for Loans in Singapore
How A Good Credit Report May Affect You
The short answer: a good credit report increases your accessibility to obtain loans and credit facilities.
Your credit report reflects your ability to fulfill your debt obligations. Credit providers thus use this information to decide whether to approve a loan or extend a new credit facility to you.
- Positive Impact:
- Better Loan Terms: With a good credit report, you can negotiate for lower interest rates, saving you money in the long run.
- Higher Credit Limits: Credit card companies might offer you higher spending limits, giving you more financial flexibility.
- Negative Impact:
- Loan Rejections: A poor credit report can lead to loan applications being declined.
- Higher Interest Rates: If lenders view you as high-risk due to a bad credit history, they might charge higher interest rates.
- Difficulty in Renting or Getting Jobs: As mentioned, a shaky credit history can affect housing and job opportunities.
Related: 5 Foolproof Ways to Improve Your Credit Score
How Can I Improve My Credit Score?
Having a healthy credit score is essential, as it impacts various aspects of our financial lives. Here’s a concise guide on how you can ensure your credit score remains in the green.
1. Never Miss Payment Dates
Why? Late payments can dent your credit score.
- Pro Tip: It’s easy to lose track of due dates. To avoid this, set calendar reminders or opt for auto-debits from your bank account to ensure you always pay on time.
2. Aim for Full Payments, but Always Cover the Minimum
Why? Missing payments can seriously harm your credit score, and it becomes increasingly challenging to clear the debt as interest accumulates.
- Pro Tip: Prioritize clearing your full bill. If that’s tough, ensure you’re at least covering the minimum amount by the deadline.
3. Think Twice Before Applying for Multiple Credits
Why? Applying for numerous credit facilities in quick succession can signal to lenders that you’re cash-strapped, which might lower your credit score.
- Pro Tip: Limit yourself to essential credit facilities and use them responsibly. Consistent, timely payments can be a big boost to your credit score.
4. Leverage Tools like My Credit Monitor (MCM)
Why? Keeping an active eye on your credit report helps in early detection of any discrepancies or unauthorized activities.
- Pro Tip: MCM is an excellent tool for this. With customizable subscription periods and real-time alerts sent directly to your phone or email, you’re always in the loop about your credit status.
Remember: A healthy credit score opens doors to better interest rates, loan approvals, and even certain job opportunities. Being proactive and using tools like MCM can go a long way in ensuring your financial health.
Related: True Story: How I Raised My Credit Score From DD To AA Grade In 6 Months
Where Can I Get A Copy of My Credit Report?
To check your credit score, you can purchase a copy of your credit report at https://www.creditbureau.com.sg/ or view a sample credit report with a detailed explanation at https://www.creditbureau.com.sg/enhanced-consumer-credit-report.html
Be sure to also follow and like the CBS Facebook page @creditbureausingapore for more useful content and tips to maintain a good credit reputation!
Read More:
- Home Loan Calculator: Find the Best Mortgage Rates Sep 2023
- 4 Key Questions To Ask Yourself Before Signing Up For A Credit Card
- Denied A Personal Loan? How To Improve Your Credit Score Now
- Why Your Credit Score Is Holding You Back & How to Fix It
- What to Look Out for When Applying for a Personal Loan for the First Time
Cover Image Source: Pexels
The article originally appeared on ValueChampion.
•
ValueChampion helps you find the most relevant information to optimise your personal finances. Like us on our Facebook page to keep up to date with our latest news and articles.
•
More From ValueChampion:
•
Home Loan Calculator: Find the Best Mortgage Rates Sep 2023
4 Key Questions To Ask Yourself Before Signing Up For A Credit Card
Denied A Personal Loan? How To Improve Your Credit Score Now