When borrowing more than $500 in the Lion City, a good credit score is king. It is a four-digit number that represents your creditworthiness. Unlike in other countries, having bad credit will not significantly increase the interest rate you have to pay.
Instead, a licensed moneylender here in Singapore will either loan you less money or reject your application altogether. Whether you have plans to take out a loan soon or not, it is imperative to keep your credit score as high as possible. It can affect other aspects of your life.
Bad credit may increase your insurance premium or make it more difficult for you to get hired. Fortunately, building your credit is not rocket science. In fact, all you need is common sense and discipline. In a nutshell, below are the ways to increase your credit score in the country.
Using Your Credit Cards Less
Make no mistake about it, paying with a credit card matters to establish your payment history. Otherwise, you cannot thicken your credit file and give financial institutions enough information to assess your risks as a borrower.
While you should not pay using cash all the time, you should not abuse your credit cards either. Credit utilisation plays a vital role in credit scoring in Singapore. Lenders and credit card issuers want to see you use your available credit without maximising the limit.
Paying Your Credit Card Bills (and Loans) on Time and in Full
Of course, you should pay your bills punctually and fully. Otherwise, your file will be filled with account delinquency data that lowers your credit score. When a late or missed payment seems inevitable, repay what you owe ASAP to stop the bleeding.
If you act to zero out your account balances fast enough, your delinquency data may carry less weight in lending decisions.
Minimising Your Open Credit Accounts
The number and frequency of enquiry activity are also factored into credit scoring. Applying for credit should not be taken against you as long as you do not overdo it. If your credit report shows that you attempted to open credit cards or applied for loans too many times over a short period, your credit score may not be as high as you think.
The lesson here is to keep your credit applications to a minimum. If you already have plenty of buying power with your credit cards, do not try to open more accounts. Regardless of the size of your regular income, do not make it a habit to take out loans.
Reviewing of Your Credit File Regularly
Last but not the least, monitor your credit file as much as possible. This way, you can identify any fraudulent activity involving your name early and address it accordingly. It is wise to request for a copy of your credit report from Credit Bureau of Singapore (CBS) before seeking credit to make sure everything in your file is correct.
If you get rejected, you may obtain a free copy provided that the financial institution that denied your application is a CBS member.
Building your credit takes time and dedication, but it will be worth it in the end. Even if you do not rely on credit cards or loans too much, you should use them strategically. This is to appear more creditworthy in the eyes of creditors in the future.
