Does credit score matter if you don’t want a loan?
If you are residing in Singapore, it is vital that you keep track of your credit score. At some point, you may suddenly need to take up a private personal loan in Singapore due to unexpected circumstances. The banks and financial institutions will look at your credit score before approving your personal loan application, thus illustrating the importance of credit score ratings in Singapore.
Definition of Credit Score
A credit score is simply a 4 digit number ranging from 1000-2000 assigned to a credit holder based on the credit report. This score represents the financial health status of a person. A higher number indicates a good credit score. A credit report will list all previous loans, repayment history, and frequency of default payments (if any). This report is available from the Credit Bureau of Singapore (CBS).
Factors Affecting your Credit Score
The Credit Bureau of Singapore will assess your credit score and provide the banks and financial institutions with a report reflecting your capability to service the loans and the probability of default payments. The following factors are taken into consideration when computing the credit score.
Recent credit card/loan application
If you have applied for numerous personal loans in Singapore within a short period of time, it will have a negative impact on your credit score as it reflects financial desperation. Most money lenders in Singapore will consider you as a high-risk client and offer you a private personal loan with a lower quantum and higher interest rates as they need to protect their own profit margins.
Timely loan repayment
Your credit score will be adversely affected if you default on loan repayment. You will be profiled as a high-risk borrower in the long run. If you run into financial difficulties, be sure to talk to your bank or approach a credit counselling provider to discuss your repayment options. Running away from your financial obligations will damage your credit score, reduce your chances of future loan applications and also drive interest rates up for all future loans.
Proper Utilisation of Credit Card Facilities
Be a good paymaster when it comes to paying your monthly credit card bills. Most people tend to get carried away when using credit cards for their purchases. When the credit card bill arrives, you are unable to pay up the current outstanding bill and request to pay the minimum sum and defer the balance amount. This might sound like a good idea at that time but it will backfire in the long run as you end up accumulating huge arrears (as a result of massive interest rates). This will lead to a bad credit score.
A longer period of credit history
Banks or money lenders in Singapore prefer clients with a long credit history as opposed to someone with little or no history at all. Clients with a long history are perceived to be reliable only if their loan repayments are made timely. These prompt repayments will boost your credit score as well.
Each time you make a new personal loan or credit card application, the financial institutions or banks will check your credit score with CBS. The credit report will indicate the frequency of inquiries made by banks or financial institutions. Your credit score will be affected adversely if you have made multiple applications within a short period of time, as it reflects financial distress.
Importance of a good credit score in Singapore
Having a good credit score reflects your creditworthiness in the eyes of financial institutions, banks, and money lenders in Singapore. A good credit score will open doors to an endless list of opportunities. For example, banks and financial institutions will be very keen to give you a private personal loan in Singapore with a higher quantum and at a faster rate. On the other hand, a low credit score signals you are a high-risk borrower, who is unable to make timely loan repayments. As a result, you will be subject to higher interest rates and a smaller loan amount.
In summary, having a good credit score matters as it increases your chances of getting the best lowest interest rate personal loan in Singapore. So start adopting a healthy financial lifestyle today by revisiting your finances so that you have a better financial standing in the future. It’s wise to visit different money lenders in Singapore before taking up a personal loan in Singapore to ensure that you get the lowest interest rate personal loan in Singapore.