Personal credit score in Singapore

Credit Score Calculation Process:  

Understanding how is your credit score evaluation is key to being financially healthy. There comes a moment in life when, a person has to take a bank loan for some reason such as education, business loan, car loan, or personal loan. To qualify for such loans, your credit score should be AA grade. During an emergency, you may need a large amount of cash. People who maintain a good credit score often find themselves lucky to get these essential financial products, and those cannot keep good credit score might be deprived of such advantages.   

How to improve your credit risk score and get it to the AA rating?  

The Credit Score Determined  

There is a proprietary algorithm in Singapore that determines your credit score. It tracks the use of your credit. The credit report can be obtained by any Singaporean, and this report shows the credit grade from the CBS (CREDIT BUREAU OF SINGAPORE) charging a fee of S$6.  

Credit Score Risk Grades in Singapore  

AA (Score 1911 – 2000) Probability of Default between <= 0.27%  

BB (Score 1844 – 1910) Probability of Default between 0.27% to 0.67%  

CC (Score 1825 – 1843) Probability of Default between 0.67% to 0.88%  

DD (Score 1813 – 1824) Probability of Default between 0.88% to 1.03%  

EE (Score 1782 – 1812) Probability of Default between 1.03% to 1.58%  

FF (Score 1755 – 1781) Probability of Default between 1.58% to 2.28%  

GG (Score 1724 – 1754) Probability of Default between 2.28% to 3.48%  

HH (Score 1000 – 1723) Probability of Default between >= 3.48%  

Credit Bureau of Singapore  

As you already know, AA credit score risk grade is the highest one whereas B or C indicate late repayments or delinquency, D credit score risk grade or lower are often caused by default payments.  

In credit grades, there are also “ungraded” credit scores such as “Cx.” For instance, if a person has no history of credit cards or using loans, then that person will have the ungraded score of “Cx.”  

In Singapore, why does a good credit score matter?  

Banks in Singapore will use your credit score to check your loan quantum for the loans above S$500*. The interest rate in the banks of Singapore based on your credit history. In case of bad credit grades, either the loan will be rejected or given a small amount of loan. That’s why it is essential to have a good credit score.  

How you can improve the credit score risk grade in Singapore?  

Here are things you can do to bring up your credit score to an AA:  

  • Never default on loans  

Your credit report will show it if you are loan defaulter. It can become impossible for you to get a line of credit, home loan, or a credit card if there is a single major default. Have your debt organized and always seek credit counseling in case you cannot make reimbursement. Lowering your credit grades is much better than becoming a defaulter. The bank can take legal action against the person if he/she has the money but refuse to make a refund.  

  • Always make repayment on the time  

Your credit score would have dropped, by the time you receive a second or third letter reminding you of late payment. The bank waives lay payment fines or not, and this will happen. 

You should inform the bank asap if you miss the payment for loans like mortgages or personal installment loans. Also, communicate to a credit counselor. There is a probability that the bank will find an alternative repayment scheme that will do less damage to credit rating. At least repay the minimum amount of credit cards, before the billing cycle ends. 

  • Limit the number of open credit facilities 

Try to limit open credit facilities, not more than four to five, such as personal lines of credit, credit cards, personal loans, and so on. Holding six to seven credit cards or credit lines is not advisable at all. You will definitely miss the payments by getting confused because of various billing cycles. 

  • Meet short-term loan repayments to repair damaged credit 

If a person has a bad credit grade, the simplest way to repair it is by paying in full any small loans or short-term loans. This will repair the damage credit in a long way, and the bureau sees that the person is making repayments in full and on time. Before applying for major loans such as business or home loan starting doing it, if your current credit grade is B or below. This will improve the rating to your desired AA grade by the time you send in your application. 

  • Avoid multiple loan inquiries in succession 

The bank might consider you “credit hungry” if you make four or five loan applications within a short time period. This is stereotypical for someone who is in financially struggling, such as someone who has been in debt. Avoid applying for multiple loans and inquiries all at once.

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