A higher credit limit may be a good answer to emergency financial situations, such as payment for ballooning bills or financing new appliances to replace aged ones. In Singapore, every bank and credit company offers great opportunities to increase your credit limits once you fulfill their requirements like having higher credit scores and good overall credit conduct.
If you’re looking to have a permanent or temporary credit limit increase, here is a complete guide to help you. The guide will detail the methods credit companies and banks use to calculate credit scores, the Singapore government’s regulations on limits, and how you can increase your credit scores.
How Do Credit Companies Calculate Your Credit Score?
Credit Bureau Singapore (CBS) calculates every borrower’s credit score. These appear as four digits, which CBS experts calculate using complex compounding mathematics while accounting for your credit history and performance. The four digits can range from 1,000 to 2,000, with representative risk grades from AA – HH, which all determine the likelihood of a borrower defaulting.
Borrowers with a 1,910-2,000 score are classified as AA-grade borrowers with virtually zero probability of loan repayment defaults. Alternatively, borrowers at the HH-grade have only 1,000 – 1,723 have the highest chance of defaulting on their loans.
Here’s the complete table from CBS and how it calculates your risk grade:
|Score Range||Risk Grade||Default Probability|
Government Regulations on Credit Limits
The Monetary Authority of Singapore (MAS) protects borrowers from incurring massive debt and junk credit scores through the Credit Limit Management Measure (CLMM).
CLMM indicates the credit limits of Singaporeans based on their current annual income and employment. For example, a borrower who has had six months’ worth of their monthly income in unsecured debt is disallowed to have credit increases. In addition, borrowers disallowed by the CLMM cannot apply for new credit cards, personal loans, and other unsecured financial products that will exceed 12 months of their monthly income.
Fortunately, CLMM does not disqualify borrowers from using their existing total credit lines and any permanent credit limit increase in the past. However, they must remain a responsible cardholder and pay for any over-limit fee they might incur even if they’re disqualified from taking on new credit lines.
Here are the total credit limit brackets that classify borrowers according to their income.
|Annual Income||Credit Limit If Less Than 55-Years-Old||Credit Limit If More Than 55-Years-Old|
|≤S$15,000||N/A (not eligible)||S$2,500|
|S$15,000 to S$30,000||(Min. S$30,000) 2X monthly income||2X monthly income|
|S$30,000 to S$120,000||4X monthly income||4X monthly income|
|>S$120,000||No regulatory limit||No regulatory limit|
Factors That Determine Your Credit Limit
Several factors significantly affect your current credit score. Learn more about each of them below.
1. Annual Income
To calculate your credit score, your annual income is one of the most important factors. If you have a stable job and substantial income, you are more likely to have a high credit score. However, if you earn only from commission or self-employment, it will be harder to raise your credit score because you lack stable employment and solid collateral.
Banks and credit companies focus on stability and reliability while governments impose CLMM to create a sustainable credit industry. With this in mind, increasing your income is one of the proven ways to have credit limit increases.
Credit histories are required to qualify for a loan or credit card. Borrowers who recently turned 20 years of age will have zero credit scores because they have yet to spend using a non-supplementary credit card. As they earn and borrow more cash through employment and financial management, they can steadily increase their credit scores within a few years. Find out more on the best credit card in Singapore.
Borrowers between the age of 30 and 45 years have the highest likelihood of loan approval in various categories because of their high credit scores. If they’ve repaid all their loans and managed their finances well throughout their first professional years, they are most likely perceived as dependable borrowers.
Retirees beyond the age of 55 will have lower credit limits and loan approval chances because they lack employment. If their current collateral, income sources, and retirement funds cannot support their estimated monthly loan payments, they won’t qualify for higher credit limits or financing even if they had a rich credit history during their professional years.
3. Current Debt
The debt-to-income ratio is a commonly used ratio of personal debt to annual income. It determines the borrower’s financial capability to cover monthly expenses and loan obligations. Debt-to-income ratio is directly affected by the borrower’s number of children, employment status, and age.
If your credit scores are low and your debt-to-income ratio is relatively high, lenders may be reluctant to approve you for a loan. On the other hand, if your credit scores and debt-to-income ratio are relatively low, lenders will be less likely to deny you a loan.
4. Current Credit Available
Your existing credit limit significantly affects your credit scores. If you often max out your cards and fail to repay them on time, it will negatively reflect on your existing grade. Alternatively, borrowers who max out their cards but pay punctually have better credit scores.
Banks need borrowers to use their credit limits a few times a month. An untouched credit card signifies inactivity. This will negatively reflect on your credit history, which is why regular and balanced card use is essential in improving credit scores.
5. Credit History
Credit history is an important factor in credit scores because it is indicative of a consumer’s payment behavior. It has data on current and prior late and missed payments, financial actions taken, and debt amounts you use.
Historical credit data is helpful when predicting a borrower’s creditworthiness because the longer a consumer has good payment behavior, such as borrowing a huge amount and paying on time, the more likely they are to have a good credit history.
6. Employment Status
An employee with a stable job and defined income often have a higher credit score than self-employed or commission-based employees. Any borrower with predictive indicators, such as regular, stable employment, will have a higher chance of loan approvals and credit limit increases.
Check out our guide on line of credit for more financing options.
Higher Credit Limit: Pros and Cons
- Lower Credit Use Ratio: A credit use ratio measures the ratio of credit used to the amount of credit available. If 10% of someone’s available credit is used, that person has a 10% interest rate. Credit ratios dictate the cost of borrowing. This means that the higher the interest rate, the higher the cost of borrowing, so borrowers must prioritize lowering it.
- Quick Approval: A higher credit limit signifies a borrower’s proper management and treatment of financial products and services. In doing so, they gain the lender’s trust of handling a lower or slightly higher credit limit or loan amount.
- Emergency Funding: In case borrowers need extra emergency funding, banks and creditors are much more lenient in approving personal loans or higher credit limits for emergency or compassionate purposes.
- Added Benefits: Higher-limit credit cards have perks and additional features. For example, businessmen with a premium card can have airport lounge access, discounts from select retailers and hotels, and even free flights.
- Reckless Spending: Borrowers with zero histories of poor credit may be tempted to use their credit limit increase to prioritize leisure and additional perks. In this context, the higher total credit limit could be a liability in their hands.
- More Credit Fees: A responsible cardholder can apply for a new credit line to raise their existing limit. However, a new credit card entails additional charges, which can raise their immediate expenses immensely. On the other hand, using your card frequently and completely paying the maxed-out card has a relatively lower risk than a new credit line.
- Higher Likelihood of Defaulting: Borrowers who take on higher credit limits, additional credit lines, and have debt obligations have a high default risk. These responsibilities can lower their credit scores if their income-to-debt ratio does not indicate they have enough to pay for their needs and financing simultaneously.
What Are The Best Ways to Increase Your Credit Card Limit?
If you want to increase your credit card limit, here are a few ways to do it.
- Regular Card Use: Credit limits are based on credit history. The bank can see how well you conduct your spending habits as you use your card regularly.
- Request a Temporary Credit Increase: A temporary credit limit increase is typically given after you have been with them for more than six months. The increases can last for 1-3 months, but you can ask for extensions with card issuers. Most temporary increase requests gain approval depending on your credit history and current credit scores.
- Credit Limit Reviews: Increasing your credit limit is a process that involves a bank or creditor interview. This process allows the borrower to demonstrate their ability to manage debt and repay loans on time.
- New Card Applications: If you have a new credit card with their competitor, your existing creditors see your ability to handle larger credit lines. Borrowers who are hesitant to apply for more credit but are confident in their ability to pay the balance off each month should consider applying for a new credit card.
- Regular Full Bill Payments: Banks derive your capacity to repay their services and financing accurately if you pay your bills and make full payments all the time. By maxing out your card and paying everything within the deadline, you indicate that you’re a capable borrower with a solid income and excellent decision-making skills.
Find out more about credit card benefits in Singapore.
FAQs For Further Knowledge
Here are a few more things to know to understand credit scores and increasing credit limits.
1. Can Credit Card Installment Payments Increase Credit Score?
Credit card installment payments are a good way to build up credit. These payments are due in installments and usually have interest rates below the interest rates of many credit cards. To be eligible for a credit card installment plan, you typically need good or excellent credit scores and work with a merchant that uses your creditor’s services.
2. Do Supplementary Cards Affect a Cardholder’s Credit History?
Yes, A supplementary card uses its primary card’s credit history, meaning it reduces the available credit once the supplementary cardholder purchases. If the primary cardholder regularly pays for the card without missing a deadline and amount, they build a positive credit history for the primary cardholder.
Generally, if you pay your balance in full every month, the bank will consider granting you additional credit, granting you additional supplementary cards.
3. Can a New Credit Line Lower My Credit Score?
Yes. A new credit line can temporarily lower your credit scores due to its neutrality in your overall credit history.
4. What Questions Do They Ask In Credit Limit Interviews?
Banks may ask you the following during credit limit increase interviews: how long you have been with the bank and your current relationship with it. Then, they will review your credit history and see whether you qualify for a credit limit increase.
5. Will Using Perks and Benefits Increase Credit Scores?
No. Using the points, discounts, freebies, or other services your card offers will not increase your credit scores by itself. Credit history depends on the management style and builds itself on the repayment frequency, and the total amount the borrower paid before the deadline.
6. Can A Junk Credit Score Still Recover?
Yes. A borrower with a junk credit score can still recover. Their scores improve once they pay back their existing debt, close all loan and credit card accounts, and apply for a lower-limit card. In doing so, they can start improving their credit history by paying back their new credit card or loan regularly, in full, and using it for practical purchases.
Our Final Thoughts
Increasing your credit card limits heavily depends on your credit history. If you have had a poor credit history, you’ll need to rebuild and establish your financial trustworthiness before taking on higher credit limits while staying within government-mandated, income-based credit limits and scores.
- Credit card company scores play a huge role in increasing your limits.
- Your income, existing debt, and current credit lines affect your credit score.
- Making huge purchases and paying them back with low to zero issues can increase your credit scores.
- Reducing debt, paying on time, and frequently using your card can improve your credit scores.
If you have yet to find a reliable personal loan provider to help with your needs, you can always use Loan Advisor’s advanced quoting service. Fill out our form today and get the three best quotes from Singapore’s top money lenders.