What is a credit score?
A credit score is an instrument utilised for ascertaining an individual’s eligibility to take out financial credit facilities, such as loans and related financial services. A credit score is typically the product of analysis and assessments made by credit bureaus based on information sourced, collated and aggregated from financial records. There are numerous credit score systems and scales in use globally. Generally, systems in the United States operate on a scale of 300 to 850, with higher scores indicating a lower risk of defaulting and vice versa. Credit scoring models in Singapore operate on a scale of 1000 to 2000.
How is your credit score determined?
A credit score is determined with information gotten from credit reports issued by credit bureaus. A credit bureau is an organisation/institution generally responsible for the collation of information, which is used by financial institutions to make decisions on credit facilities. In Singapore, the Credit Bureau Singapore is responsible for determining an individual’s credit score. The bureau makes sure that the computation of its credit score is on account of an individual’s credit information generated in the course of transactions and engagements with financial institutions that are part of Credit Bureau Singapore’s membership network. However, a credit score issued by the bureau is far from the sole metric/instrument used for assessing creditworthiness in Singapore. The financial institutions in Singapore usually use simultaneously with other rating systems that may include information pertaining to an individual’s demographic details. The Monetary Authority of Singapore supports the Credit Bureau Singapore, which is a collaborative project between the Association of Banks in Singapore (ABS) and Infocredit Holdings in its operations. The Credit Bureau of Singapore also manages the Moneylenders Credit Bureau (MLCB), a central database for loans and repayment records in Singapore.
How to get free Credit Bureau Report Singapore
Credit reports are available on-demand from the Credit Bureau of Singapore at the cost of $6. Alternatively, a CBS credit report can be accessed for free consequent upon the lodgment of a credit card or loan facility application with a financial institution that is a member of Credit Bureau Singapore. A credit report may be gotten along with the letter of approval or rejection of an application for a credit facility within a specified timeframe. According to The United Overseas Bank (UOB), its customers can access credit reports at no cost within thirty days from the date of credit facility application approval or rejection. In furtherance, the United Overseas Bank also intimates that the free credit report can be accessed by simply presenting an approval or rejection notification and National Registration Identification Card (NRIC) at a stipulated credit bureau location.
A CBS-issued credit report is structured into nine sections containing information on personal data, credit history, bankruptcy, and defaulted payments sourced from various credit providers. Typical contents include physical address locations and contact details, records on loan facilities accessed and payments made on accessed credit facilities.
What is a good and bad credit score?
The Credit Bureau Singapore grades an individual’s creditworthiness on a scale of 1000 to 2000. An individual may be rated AA, BB, CC, DD, EE, FF, GG, and HH. The implications of these ratings as well as associated scores are listed below:
1. An AA rated individual typically has a credit score within the range of 1911 to 2000. Individuals rated AA has a less than 0.27% chance of defaulting on credit facility repayments.
2. An individual rated BB has a credit score within the range of 1844 to 1910. Individuals rated BB have a 0.27% to 0.67% chance of defaulting on credit facility repayments.
3. An individual with a rating of CC has a credit score within the range of 1825 to 1843. CC rated individuals are characteristically adjudged to have a 0.67% to 0.88% chance of defaulting on credit facility repayments.
4. An individual with a rating of DD has a credit score within the range of 1813 to 1824. DD rated individuals are usually adjudged to have a 0.88% to 1.03% chance of defaulting on credit facility repayments.
5. An individual with a rating grade of EE has a credit score within the range of 1782 to 1812. Individuals rated EE have a 1.03% to 1.58% chance of defaulting on credit facility repayments.
6. An individual with a FF rating has a credit score within the range of 1755 to 1781. Individuals rated FF have a 1.58% to 2.22% chance of defaulting on credit facility repayments.
7. An individual with a rating GG rating has a credit score within the range of 1724 to 1754. Individuals rated AA has a 2.28% to 3.48% chance of defaulting on credit facility repayments.
8. An individual with a rating of HH has a credit score within the range of 1000 to 1753. Individuals rated HH have a more than 3.48% chance of defaulting on credit facility repayments.
From the various figures and analyses above, a good credit score falls within the AA rating range: in numeric terms, it falls within the range of 1911 to 2000. On the other hand, a bad credit score belongs to the HH category: in numeric terms, it falls within the range of 1000 to 1723. Further analysed, the worst possible score and the best possible score is 1000 and 2000 respectively. People with low scores are considered high-risk and ineligible to access credit facilities and instruments.
Why does a good credit score matter in Singapore
In Singapore, financial institutions use credit scores to make decisions on granting credit facilities like education loans and credit card applications. A good credit score can result in lower interest rates for loans and less stringent conditionalities. The Housing and Development Board normally utilises credit to decide who qualifies to access mortgage and load applications. The HDB uses credit score information to determine an applicant’s eligibility to take out a loan facility. Labour employers equally make use of credit score information for recruitment purposes: In the last quarter of 2019, the Monetary Authority of Singapore (NMAS) made a declaration in favour of the validity of investigations of credit history of active job seekers, potential employees and employers. As such, having a good credit score is a major factor that determines the extent of an individual’s access to financial facilities and employment opportunities in Singapore.
How to check credit score in Singapore
The Credit Bureau of Singapore has made available a number of options that can be used to check credit scores. These options guarantee free or paid access. Free access is available for first-time credit facility applicants. To redeem this option, an applicant has to apply for a card or loan facility application with a financial institution that is a member of Credit Bureau Singapore. Upon the receipt of a credit application approval or rejection notification, the applicant can proceed to obtain a free credit report containing a credit score within thirty days from the date stated in application approval or rejection. Alternatively, an interested individual can access credit score by buying a credit report from the bureau or asking for a copy of the credit report to be sent to a selected government agency (either the Casino Regulatory Authority, Housing and Development Board or the National Council on Problem Gambling). These two steps attract a fee charge of $6.42 (Six Singaporean Dollars).
How to improve my credit score in Singapore
The paramount technique to improve one’s credit score in Singapore is to avoid practices that adversely affect credit score and history. This entails doing the following things: ensuring the prompt payment of loans and bills, keeping a minimal number of credit cards to build a positive credit history and reducing the frequency of applications for credit facilities. Staying off loan default, bankruptcy and debt management programmes represents another useful strategy for improving one’s credit score. Typically, making late payments on loans, taking out too many loans within a short period and defaulting on loans ruins one’s credit score, leading to worse ratings which can subsequently derail access to financial facilities and employment opportunities in Singapore. A good credit score primarily affords citizens’ plans and goals financially.
What causes a bad credit score?
Many factors interfere with or influence an individual’s credit score. Such factors are typically stated in a credit report. Key factors may include credit history, penal history and credit records. To elaborate, individuals without sufficient credit records may find it difficult to have a good credit score. Frequent borrowing, delayed and unfinished loan repayments, and criminal activities also adversely affect an individual’s credit score.