Updated: Mar 19, 2021
(This article is contributed by Monica Mendoza.)
Singapore follows a credit score system in which credit holders are assigned aggregate credit scores between 1000 and 2000. These scores are used to assess creditworthiness, or how reliable the borrower is at paying back their debts. The borrowers’ creditworthiness also helps banks and other lending institutions determine how trustworthy a borrower is if they are given greater financial privileges.
Information that determines a borrower’s credit score comes from their repayment records for past and existing debts, like their credit card bills and loan payments. It also includes application records for credit facilities, like new credit card or loan applications. Three agencies are capable of issuing a credit bureau report Singapore residents can check on. For credit info from banks and other financial institutions, we have the Credit Bureau (Singapore).
Credit scores matter a lot to the everyday financial health of Singaporeans. They’re a basis for whether one can be trusted with greater financial privileges, and whether one will receive those privileges when they need them most. Once you’ve begun taking out loans or applying for your first credit cards, your credit score is something you will need to pay close attention to. Below are five reasons why it’s important to maintain a healthy credit score and become creditworthy in the eyes of your lenders.
You’ll Be Eligible to Borrow Larger Amounts of Money at a Time
Creditworthiness is something you can slowly build up over time. Start by paying small amounts of credit on time and increasing your credit score. When it’s high enough, banks and other lenders will eventually begin to trust you with larger amounts of money at a time. You will be able to borrow more money in your succeeding lines of credit, and you can address your needs more comfortably.
You’ll Be Eligible for More Favourable Credit Programs
Banks will also issue some favourable perks to customers with higher credit scores. If you have a good track record paying off your first credit card, you may become eligible for another card with better rebates. This will allow you to save more money when spending on daily necessities. It may also allow you to rack up rewards points for shopping with the bank’s partner merchants.
You’re More Likely to Get Approved for Major Loans
A healthy credit score will also increase your chances of approval for a variety of loans. These include auto loans, home loans, or education loans for your children. Not only will you be able to borrow larger amounts of money on these loans. The approval process for these will likely be faster if you meet the ideal credit score.
You Won’t Have to Rely on More Expensive Methods to Borrow Money
Having a good credit score now will make it easier to borrow money at a lower cost in the future. Banks are often the most consistent creditors, as well as the cheapest to borrow from. But if you have a low credit score, banks may refuse to lend you money. In turn, you may need to resort to more expensive sources of credit, like accredited moneylenders or pawn shops. These are short-term borrowing solutions that, if relied on too frequently, may deal even more damage to your credit score in the end.
It Can Give You a Better Chance of Securing a Job
Credit scores may also factor into your employability, especially for a sector like finance. In 2019, the Monetary Authority of Singapore deemed it appropriate for employers in financial companies to request the credit scores of potential hires. If you’d like to land a lucrative job in Singapore’s finance industry one day, you’ll want to work towards getting a good credit score. Your would-be employers will get the best impression of your financial capabilities through your personal creditworthiness.
Final Words: Some Tips on Maintaining a Good Credit Score
Now that you know the value of a good credit score, it’s time to ensure that yours stays healthy. Here are some quick tips for maintaining your day-to-day creditworthiness as a borrower.
● Keep track of outstanding payments you need to make on all the money you’ve borrowed from a bank or other lender. Always settle your loan payments and credit card bills in full, and on time. ● Don’t apply for too many credit facilities at once. This will give creditors the impression that you’re “credit-hungry” and not in good financial standing. Only apply for credit facilities that you truly need and know that you can manage properly.
● In a similar vein, don’t keep too many credit facilities open at the same time. The more credit you take on, the more expensive it will be for you to repay. This will eventually mean a lower turnout for your credit score. ● Remember that you can still remedy a damaged credit score, which is better than being declared bankrupt. If your score seems low, make a plan to demonstrate promptness on payments over a 12-month period. Your consistent repayment of small loans will slowly improve your creditworthiness.
Keeping tabs on your credit score and actively working to increase it will open up many new financial opportunities for you. Don’t forget to keep your credit score in perspective and to include a healthy credit score in your list of long-term financial goals.