Most Singaporeans rely on getting a personal loan for big-ticket purchases, such as buying a car or property. But did you know that your chances of getting approved for a loan are affected by your credit score?
Financial institutions use your credit score to determine whether you’ve been diligent with your credit card bills and other debts. That said, a bad credit score can affect your applications for loans and credit cards. Sounds scary? It shouldn’t be!
It’s best to understand a credit score, how to read it, and how the system works. In Singapore, your credit report is generated by the Credit Bureau Singapore (CBS). They have 100% full-industry uploads from all retail banks and major financial institutions.
Learn how to get your CBS report here.
How To Check Credit Score in Singapore?
The easiest way to check your credit record is to purchase it from CBS. It only costs S$6.42 payable by Visa, MasterCard, or eNETS.
Here’s how:
- Request a softcopy online or
- Request a hardcopy at any of the SingPost branches, at the Credit Bureau office, or at CrimsonLogic Service Bureaus.
- Pay S$6.42 (including GST) + S$2.00 for multiple delivery modes.
Note: If you’ve just applied for a new credit card or loan facility with any CBS member, you are entitled to a free credit report.
Understanding Credit Score
A credit report shows whether you’re diligently paying off your credit card and other loans. Here you will find a compilation of your credit payment history across all your banks. In Singapore, the Credit Bureau Singapore (CBS) issues a credit report to banks, finance companies, and credit card companies when they make inquiries about you.
The credit report includes the following:
- Basic personal profile date – excluding your contact addresses and telephone numbers
- Records of all credit checks made on you
- Credit repayment for the past 12 months, including late payments on credit card bills
- Default records (if any)
- Bankruptcy records
- Closed or terminated credit accounts
- Aggregated outstanding balances
- Aggregated credit limits
In your credit report, you will also find your credit score.
What Is a Credit Score?
A credit score is a four-digit number that is statistically derived from your credit history. This means your credit score will depend on your past payment trend. Additionally, your credit score will help banks and other financial institutions determine how likely you are going to repay your debts and default on payment.
An individual’s credit score ranges between 1000 and 2000. Those on the lowest end of the scale (1,000 points) are flagged as having the highest risk of defaulting on a loan. They are rated HH.
On the other hand, those with the highest score (2,000 points), are perceived as having the lowest risk. They will enjoy a high credit rating of AA.
What Affects Your Credit Score?
- Recent Credit: How many accounts have you applied for recently? Remember, banks or financial institutions will do a hard inquiry whenever you apply for a new credit line. This will be recorded in your credit report.
That said, if you’re applying for a new credit card, it’s best not to apply for multiple credit lines at once. This may cause your credit score to drop.
- Utilization Pattern: The total amount of credit you owed or used on your credit facilities. For instance, if you suddenly took a lot of loans, banks might be concerned over the sudden spike in usage pattern.
Additionally, it’s best to consider your credit utilization ratio as well. How much debt do you have compared to your available credit limits? To maintain a good credit score, your credit utilization ratio must be kept below 20%.
- Account Delinquency Data: Did you miss any repayments for your credit card or loans? All late repayments and other delinquent behaviors are recorded by the CBS. If your credit report has a number of delinquency data, it will lower your credit score. Thus, it will signal to financial institutions that you aren’t a reliable borrower.
- Enquiry Activity: As previously mentioned, each inquiry is filed every time you apply for a credit card. However, this is also true whenever you apply for a loan. So before sending your loan applications, it’s best to compare different loan packages using loan comparison tools.
- Credit Account History: How long have you been using credit? Long credit history is helpful, especially if you don’t have late repayments or any negative items in your report. If you have an established credit history, you are deemed more reliable by financial institutions.
Short credit history is fine as well. However, make sure to pay your debt obligations on time. Plus, it’s important that you don’t owe too much.
What Constitutes Good or Bad Credit Score?
First, let’s take a look at the credit score risk grade in Singapore:
| Rating | Score | Probability of Default |
|---|---|---|
| AA | 1911 – 2000 | between <= 0.27% |
| BB | 1844 – 1910 | between 0.27% to 0.67% |
| CC | 1825 – 1843 | between 0.67% to 0.88% |
| DD | 1813 – 1824 | between 0.88% to 1.03% |
| EE | 1782 – 1812 | between 1.03% to 1.58% |
| FF | 1755 – 1781 | between 1.58% to 2.28% |
| GG | 1724 – 1754 | between 2.28% to 3.48% |
| HH | 1000 – 1723 | between >= 3.48% |
Aside from the extreme ends of the spectrum, where a credit grade of AA is clearly good and HH is clearly bad, it can be challenging to tell whether your credit score is good or bad.
That said, it all depends on the risk appetite of the lender. For instance, it may depend on the default rate that the bank or financial institution is willing to risk. This is why the lending policies of different financial institutions vary.
Note that your credit score is only one of the many factors that may affect the lender’s decision. Other factors include:
- Annual salary
- Length of employment
- Bankruptcy or litigation information
How To Read Your Credit Report
Summary
(Summary section of a Credit Bureau Report taken from CBS website)
This section provides a quick summary of the entire credit report. Here you will find the following details:
- Your earliest known credit account
- Number of previous enquiries
- Total number of credit facilities with lenders
- Total default data
- Bankruptcy information
- Aggregate credit limit based on secured, unsecured, and exempted credit facilities
- A “Y” flag will be indicated if you are part of Credit Counseling Singapores’ Debt Management Programme
- A “Y” flag will be indicated in the event you lose your ID and you wish to alert lenders for precautions
Personal Details
(Personal Details section of a Credit Bureau Report taken from CBS website)
This is where all your personal information is listed. It also contains additional identification details, such as:
- Additional names
- Additional addresses – the last 3 full address details
Account Status
(Account Details section of a Credit Bureau Report taken from CBS website)
This is where you will find information on all your credit facilities. It also indicates your repayment behavior in the last 12 months.
Each credit account has a string of 12 letters. These are divided into three rows:
- First Row: It reflects your repayment history on that account, in the given month.
- Second Row: Only shows the letters “Y” and “N” (for Yes or No). This records any cash advance or balance transfer on your account.
- Third Row: This row only exists for credit cards and also shows the letters “Y” and “N”. It indicates whether a full payment was made for that month.
Previous Enquiries
(Previous Enquiries section of a Credit Bureau Report taken from CBS website)
This section lists all the enquiries made on your credit report.
For instance, if you’ve applied for a credit card or loan, the bank will request a copy of your credit report. This request will be recorded by CBS. It will then be reflected in your report for the next 2 years from the date of enquiry.
Default and DRS Records
(Default section of a Credit Bureau Report taken from CBS website)
This is a record of any debts you’ve failed to repay. It also lists the dates and names of relevant institutions. That said, never default on a loan since it will appear on your credit report indefinitely.
Note: If you’re a part of the Debt Management Programme, your status under the program will be listed here.
Bankruptcy Proceedings
(Bankruptcy section of a Credit Bureau Report taken from CBS website)
In this section, you will find any bankruptcy order or notice of discharge. Bankruptcy details are removed five years after receiving the official certificate of discharge from bankruptcy.
Bureau Score
(Bureau Score section of a Credit Bureau Report taken from CBS website)
Finally, this is where you will find your credit score. This score will determine your creditworthiness. The higher the score, the lower your risk of defaulting on your debts.
The Bureau Score ranges from 1000 to 2000 for risk grades AA-HH. This score is not applicable if the risk grade is HX, GX, BX, or CX.
(Risk Grade taken from CBS website)
How Does Credit Score Affect Loan Eligibility?
Your credit score is used by banks and other financial institutions to assess how likely you are to repay your debts. So if you’re planning to take out a loan, make sure that your credit score looks good.
A bad credit score will affect your loan eligibility.
- You’re less likely to be approved for loans – personal loans, business loans, or education loans
- If you are approved for a loan, you may have a hard time getting lower interest rates
- You will have a hard time getting a credit card
- It may also affect your HDB loan application
- Sometimes, prospective employers may take a look at your credit score, especially if you work in the finance industry.
Financial institutions may consider your credit score as a reflection of how responsible you are with your money.
How To Improve Credit Score in Singapore?
What if you have a low credit score now? Don’t fret! There are ways to improve your credit score. Remember, the Credit Bureau Singapore will record prompt repayments over 12 months.
- Always repay loans in time.
- Keep at least one credit card active.
- Avoid applying for too many loans or credit cards in a short time.
- Never default on your loans.
Also look at our article on how to improve credit score.
Closing
Your credit score plays a huge role when applying for credit cards and other loan facilities. That said, it’s important to learn how it works. Thankfully, it’s not impossible to improve your credit score.
Key Takeaways
- A credit report shows whether you’re diligently paying off your credit card and other loans.
- Credit scores are four-digit numbers that are statistically derived from your credit history.
- An individual’s credit score ranges between 1000 and 2000. The highest score is 2,000 points and has a credit rating of AA.
- The easiest way to get a credit report is to purchase it from CBS.
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