Why A Good Credit Score in Singapore Matters
Key Takeaways:
- 1. You need a good credit score, as financial institutions in Singapore may use it to assess your creditworthiness. This may help you to apply for credit facilities such as cards and loans. It might also affect the terms, fees, and interest rates you are offered.
- 2. You can check your credit score digitally in Singapore from a credit bureau.
- 3. To achieve a good credit score, pay any loans (including credit cards and margin trading) you are liable for in full and on time. Avoid applying for multiple credit facilities in succession.
What are credit scores?
Credit bureaus like Credit Bureau Singapore and Experian Credit Bureaux collect and aggregate information from participating banks, financing firms, brokerages, and credit card issuers to provide a holistic credit risk profile of borrowers to financial institutions. With the information collected, a credit score is assigned.
The scoring algorithm, which may change from time to time, considers your performance in your loan accounts combined with other credit data over a 12 to 36-month period. If you have a less-than-satisfactory score, you will be able to improve it over time by performing the tips outlined later in this article.
Lenders use credit reports on a voluntary basis as one of the factors that contribute to the approval or rejection of a loan application.
Any other party, such as your employer (except for some roles in the financial sector), landlord, or even a government entity like the Housing Development Board (HDB), cannot request for your credit score directly from a credit bureau.
Individuals in Singapore can purchase and download their credit report via the steps outlined by the respective credit bureaus. However, member organizations of credit bureaus may only access credit reports when the individual applies for a loan and consents to the appropriate loan office accessing the report.
Why you need a good credit score
1. Loan and credit facility approvals
Member firms may consider your credit report when processing your loan application – from mortgages to renovation loans to education loans to credit cards. Credit cards are a form of high-risk unsecured loan, unlike a mortgage where the bank has the underlying property as a security, and credit delinquency may weigh heavily on the card approval process.
2. More favourable terms and interest rates
Depending on the loan you are applying for, you may be eligible for lower interest rates if you exceed a certain credit score threshold. Other terms of the loan, such as prepayment, cash down payments, loan duration, and so on, may also be more favourable. This can be a considerable cash amount and flexibility for you over the loan term.
3. Housing Development Board (HDB) requirement
If you do not have regular Central Provident Fund (CPF) contributions in Singapore, the HDB may request for you to voluntarily submit your credit report in the process of applying for an HDB Loan Eligibility letter (HLE)1.
How to achieve a good credit score in Singapore
Here are some factors2 which contribute to your credit score:
- Immature Credit History
- Credit Exposure
- Delinquency Presence
- Not Enough Clean History
- Adverse Credit History
- Too Many Enquiries
Below are practical examples of how to address each factor.
Immature Credit History – start using a credit card and pay the card’s bills diligently
This is mainly applicable to young adults who have just entered the workforce. The simplest way to address it is to start using a credit card and use it to pay a few bills or expenses. You can act like the credit card is a debit card and keep the amounts small. This will build up your credit history.
Credit Exposure – limit your total loan amount and loan facilities
Relative to your income and assets, limit the total loan amount and loan facilities (for example, the number of credit cards). Reduce your credit card monthly limit relative to your salary so that you don’t accidentally over-extend credit.
Delinquency Presence – pay your instalments on time and in full
Pay your loan instalments by the due date and in full. Exercise discipline in budgeting, monitor your accounts, and time when your salary is credited to make sure you can make payments on time. Defer or reduce purchases during the month to have an adequate buffer so that you don’t end up making late payments on loan instalments.
For Citi Credit Card owners, you’ll be instantly notified of credit card statements when you enable the push notification function on the Citi Mobile App. You can pay Citi Credit Card bills using a non-Citibank account as well as with AXS, FAST, online banking, or the Citi Mobile App.
Not Enough Clean History and Adverse Credit History – you may need credit counselling
These two factors mean the cumulative number of delinquent activities exceeds a certain threshold, or you may have defaulted entirely on some loans. You may need professional advice in this case. For example, Credit Counselling Singapore is an organization that helps Singaporeans with debt management.
Too Many Enquiries - avoid applying for new credit facilities in quick succession
Avoid opening multiple lines of credit within a short period. Research whether you are eligible for the loan in advance. Read through the details of the loan’s requirements and discuss them with your loan officer before applying formally.
How to check your credit score In Singapore
To receive a soft or hard copy of your credit score, follow the multiple options available on the respective credit bureau’s website.
In conclusion, maintaining a good credit score is important for your financial future, so keep track of your credit report and work to improve your score if necessary.
Sources
1Visit https://www.hdb.gov.sg/residential/buying-a-flat/financing-a-flat-purchase/application-for-an-hdb-loan-eligibility-hle-letter/income-guidelines-and-documents for more information
2Refer to https://www.creditbureau.com.sg/credit-score.html and https://www.experian.com.sg/consumer-services for more information
Disclaimers
This article is for general information only and is not intended to be a forecast of future events nor a guarantee of future results and should not be relied upon as financial advice. All views and opinions are as of the date hereof, and are subject to change based on market and other conditions without notice. The article has no regard to the specific objectives, financial situation and particular needs of any specific person. It is neither an offer nor a solicitation to purchase, nor endorsement or recommendation of any products or services mentioned therein, and the products or services mentioned may or may not be offered by Citibank Singapore Limited, its related entities and their respective directors, agents and employees (together "Citigroup").
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