Credit has been an essential part of Singapore’s fast-growing economy. And, in today’s modern living, one simply can’t live without it. Yet, you need to have a good credit score to take advantage of these credit lines. This score defines your creditworthiness and is the key to unlocking many financial benefits.
You may get quicker approvals for home loans, car loans, and business loans with a good credit score. Sometimes, finance companies and other employers also check credit reports to gauge an applicant’s trustworthiness, especially when the job requires managing finances or high-stake projects.
Still, with bad financial decisions, things may go out of hand and damage your credit score. Should this happen to you, know that there are ways to get these scores up. This guide will help you get back on track and clear your bad credit score at the Credit Bureau of Singapore (CBS).
What is a Credit Score?
A credit score is a number that ranges between 1000 and 2000 and measures your credit behavior. 1000 is the lowest score one can have, and individuals with these scores are flagged as high-risk creditors.
On the other hand, those with credit scores on the other end of the scale are perceived as low-risk creditors. Hence, a bad credit history becomes a reason why many credit card and loan applications get rejected.
Financial institutions givenaccess to your credit file use these four-digit scores for their lending decisions.
Consequently, an individual with an AA credit rating will get faster loan approvals and lower interest rates from a bank or financial institution. The credit score determined also come with an equivalent risk grade that measures the probability of default, as shown in the table below:
| Credit Score | Risk Grade | Probability of Default (%) |
| 1911 to 2000 | AA | ≤ 0.27 |
| 1844 to 1910 | BB | 0.27 to 0.67 |
| 1825 to 1843 | CC | 0.67 to 0.88 |
| 1813 to 1824 | DD | 0.88 to 1.03 |
| 1782 to 1812 | EE | 1.03 to 1.58 |
| 1755 to 1781 | FF | 1.58 to 2.28 |
| 1724 to 1754 | GG | 2.28 to 3.48 |
| 1000 to 1723 | HH | 3.48 |
To know your credit score or credit grade, you may request for a credit report from the CBS. Also known as the CBS report contains an aggregation of your credit history from different credit lines and presents your current financial circ*mstances.
Singaporeans can purchase this credit report from their website at a minimal fee of S$6. Simply log in using SingPass, pay the cost, and download a PDF copy of the credit report. Alternatively, you may also get it at SingPost branches at S$17.12.
Learn more on how to achieve high credit score in Singapore.
How Your Credit Score is Determined
CBS calculates your credit score through an algorithm that tracks your credit activities. This score changes as new credit activities are to be accounted for from time to time.
Key contributing factors that could affect your score include
- Late payments on credit card bills
- Defaulting on credit cards,
- A lacking or short credit history
- Using up more than 30% of your credit limit
- Having too many loans
- Applying for credit cards from different banks at the same time
- Bankruptcy or impending litigations
Non-scored Risk Grades
Most creditors, especially beginners, may not quite understand what non-scored risk grades are. However, it is still part of the scoring system, and creditors need to know what they mean and what they need to do about it.
Non-scored risk grades and their interpretations:
HH
This score means you have a high probability of default based on your borrowing history. As a result, banks may not approve your loan or credit card applications.
HX
To have this score means you have bankruptcy or an ongoing litigation case filed against you. This score will be removed after three years when your case concludes. It may not immediately mean disapproval, and you may still appeal by calling your bank.
HZ
An HZ score reflects a bad credit payment history and will likely result in loan disapprovals.
GX
This means that you have no credit score available. However, you will have lower chances of approval for financial products like business or personal loans.
BX
This score means that all your accounts are closed or only a bridging or margin trading account is on file.
CX
A CX score is quite similar to a GX and means a lacking or minimal credit history to compute for a credit score.
What Affects Your Credit Score?
Financial missteps can have unwanted repercussions, such as being unable to avail loans from banks, credit facilities, and other financial institutions. Or, you may get approved for a loan but with higher interest rates. These circ*mstances may all depend on your credit score. So, it is crucial to know which factors significantly affect your credit score.
Critical Factors
1. Utilization Pattern
Generally, any balance may affect the credit score. However, a more considerable drop happens when you cross the 30% threshold. Thus, a low credit utilization pattern across all your cards effectively maintains a good credit score.
However, even if you have high credit utilization ratios, you can still keep a good score by paying your outstanding balances in full, timely, and consistently.
2. Recent Credit
A new or recent credit may stay on your credit for twelve months. This factor makes up 10% of your score and represents higher credit risk, especially for those with a short or lacking credit history.
3. Account Delinquency Data
Failure to make the required monthly payments can hit your credit score. While missing a month’s payment is considered delinquent, only when two or more payments are missed will it require reporting to the CBS. Limit the number of open credit facilities to a manageable number to avoid missing out on a payment.
4. Credit Account History
Analyzing historical data based on your existing credit facilities plays a huge role in determining your credit score. This factor typically accounts for 15% of your credit score and can also be used to predict future payment behavior.
5. Available Credit
The current scoring model considers the percentage of available credit in all your existing credit lines. As a general rule of thumb, use only 30% or less of your card’s credit limit.
6. Inquiry Activity
Be careful of making inquiries on multiple credit cards and other financial products in a short period. These inquiries are reflected in a credit report and may stay on record for up to two years. Additionally, these inquiries may also be interpreted by banks as a form of financial trouble.
How Can You Improve Your Credit Score?
Generally, you can clear a credit score in as fast as 12 months. However, this recovery time may not be the same for everyone and depends on unique financial circ*mstances. Yet, here are proven ways that could effectively help pull up your scores and clear bad credit score from CBS.
1. Repay loans on time.
An account repayment history is kept on a 12-month rolling basis. Thus, it is safe to say that you can improve your score within this time frame. A waiver on late payment fees does not guarantee that your credit score will not be affected. Thus, work on repaying your loan’s monthly installments in full and consistently on time.
2. Never default on payments.
Defaulting on a loan or monthly payment will be shown on a credit report indefinitely and it may take years to clear this up. Defaulting will also make it almost impossible for you to get a credit card or a loan approved by financial institutions in the future.
If you can’t afford to pay the full balance, pay at least the required monthly minimum to keep you in good standing.
3. Avoid applying for unnecessary accounts or taking multiple loans within a short time frame.
It is best to avoid applying for unnecessary or new accounts too rapidly as accounts also lower your average account age. At the same time, refrain from applying for multiple loans or too many credit cards within a short period. Instead, focus on the right mix of credit accounts instead of opening credit lines of the same types.
Learn to avoid these financial mistakes and keep track of how much you owe. This way, you will be able to create a debt management plan and be able to maintain a healthy credit score.
How Does A Bad Credit Score Affect You?
A bad credit score, more so a low one, will affect borrowers in many ways. For one, you will have difficulty getting any kind of loan approved. You may even get rejected for work in the finance industry. Thus, it is important more than ever to start improving your scores and clear the bad ones at CBS through proven and effective ways mentioned in this article.
Closing
While it may take months to raise a score one notch, it may take as short as one day for a score to drop the same way. If you are having trouble clearing your credit score, seek credit counseling. Poor financial decisions and debt management are always behind a bad credit score.
Key Takeaways
- A credit score is only one factor out of the many factors that are used to assess credit line applications.
- CBS does not take part in the evaluation process but rather only provides the credit report as requested by a financial institution.
- Banks have the sole discretion of approving or rejecting a loan or credit card application
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