Your credit score is an essential 4-digit number, ranging from 1000 to 2000, maintained by the Credit Bureau Singapore.
The score is used to determine loan terms, interest rates, and outright loan approval. Therefore, if you intend to take a personal loan, your credit score must be good.
In this post, we will give you actionable, detailed tips to understand and improve your credit rating, putting you in the best position for whatever type of financing you may need.
What Affects Your Credit Score
Before you improve your score, you need to understand the key factors CBS uses to calculate it. These factors include:
- Payment History: This is the most crucial factor. It shows whether you pay bills on time.
- Credit Utilization: This is the ratio of total income balances to total credit limits. Lower ratios are better.
- Length of Credit History: This is the average age of your accounts. A longer, well-managed history helps your score.
- Types of Credit & New Credit: A good mix, such as a credit card and a personal loan, helps improve your credit score. On the other hand, many new applications in a relatively short period will hurt your score.
Tips to Improve Credit Score
1. Pay All Bills, Not Just Loans, Always On Time
Any late or missed payments can seriously hurt your score. Therefore, to avoid missing payments due to forgetfulness, set up reminders for all recurring debts, such as personal loan installments, and even utilities.
2. Keep Your Credit Utilization Ratio Low
Try to use less than your average credit limit. Usually, high usage means you depend on credit, which may hurt your credit score. But you can improve by requesting a credit limit increase only if necessary.
3. Build a History of Proper Debt Management
The history of debt management is a significant factor in determining your credit score.
4. Space Out Your Credit Applications
Several inquiries over a short period indicate financial distress and low scores. Therefore, you should space your applications.
5. Diversify Your Credit Mix Responsibly
A healthy mix of credit, such as personal loans, car loans, etc, can be good, as it shows you’re able to deal with different types of debt. However, do not borrow because of a desire to “mix” credit. Mainly, if you genuinely need an installment loan, such as for home improvement, and handle it responsibly, it might have a positive effect on your score over time.
7. Clear Outstanding Debt and Avoid Defaults
If you have debts in arrears, settle them. Settle all your defaults and make sure the “settled” status is correctly reflected on your report. Importantly, if you have many debts, consult a licensed money lender for advice on a debt consolidation plan. A debt consolidation loan consolidates payments into a single installment and helps you avoid further late-payment penalties.
The Role of a Licensed Money Lender
While it’s your responsibility to ensure your improve your credit score, you cannot do all that entirely on your own. You need to partner with a reputable money lender to offer professional advice on how to handle debt. Importantly, one of the ways to boost your credit rating is through borrowing from a licensed lender and making consistent, timely repayments. This actually help build a positive credit history, showing you are reliable to prospective creditors in the future.
Notably, when you borrow from us, as a licensed money lender in Singapore, we report your loan and repayment data to CBS. That means a loan from a money lender is not invisible as it forms part of your credit history.
Conclusion
Improving your credit score requires long-term, consistent effort and disciplined financial habits, along with patience and frequent monitoring.
Therefore, begin by obtaining your credit report, then apply the tips above to improve it over time.
With a good credit score, you have a better chance of accessing financial products and securing lower interest rates, saving you money over your lifetime.