Your credit report is the complete record of your credit history. In Singapore, it is issued by the Credit Bureau Singapore. The members of the bureau, including banks and other financial institutions, use this report to know your creditworthiness whenever you apply for a loan. However, this doesn’t mean that only members have access to this report. You can also request the bureau for your own report.
The credit report summarises your credit acquisitions, besides compiling your usage and repayment record. This report comprises several specific details pertaining to your credit profile. It has details or data pertaining to past credit assessment and indicates the way in which repayments were made. However, the profile doesn’t reveal your phone numbers and physical addresses.
In other words, a credit report provides a record of your payment behaviour, which in turn reflects on your ability to repay a loan. The report is used to determine your credit score. This is why lending institutions mostly depend on it so as to decide whether a borrower can qualify for a new loan. Almost every lender today checks your credit report to make an assessment about your creditworthiness before approving your loan requests. If your existing credit report is robust, it’s usually easier to get a loan for big-ticket spends such as wedding, car loans, mortgages, and retirement plans.
A point to note: You can’t build a credit history, if you don’t already have any debt.
The credit report essentially contains a detailed history of all the credit transactions and repayments you make, besides other details relevant in assessing your creditworthiness. A typical credit report contains the following sets of information:
The credit report provided by the Singapore Credit Bureau will also highlight your credit score. A credit score is a four-digit number that shows the risk that a lender would be taking while lending you funds. This score usually ranges from 1,000 to 2,000. Based on this core, your risk grade is calculated which starts from “AA” and ends at “HH”. The following table will illustrate the risk grades assigned against various ranges of credit scores along with the minimum and maximum probability of default:
|Range of Credit Score||Risk Grade Assigned||Default Probability|
|Minimum probability of default||Maximum probability of default|
|1911 - 2000||AA||0%||0.27%|
|1844 - 1910||BB||0.27%||0.67%|
|1825 - 1843||CC||0.67%||0.88%|
|1813 - 1824||DD||0.88%||1.03%|
|1782 - 1812||EE||1.03%||1.58%|
|1755 - 1781||FF||1.58%||2.28%|
|1724 - 1754||GG||2.28%||3.48%|
|1000 - 1723||HH||3.48%||-|
A credit report can affect you in the following ways:
You can improve your credit report by incorporating the following practices:
The credit report reflects on an array of aspects related to your credit profile. It’s never considered ideal to have too many debts and it really affects your credit report or score negatively. Additionally, you must also avoid holding on too many credit accounts as it is another aspect affecting your credit report.
You might owe small debt amounts scattered across several credit accounts which can be easily repaid. But, while compiling the credit report or computing your credit score, having too many credit account is often considered as a sign of default. This is because people often apply for more credit options only when they default on their previous credit accounts or when they are unable to repay the outstanding amounts on previous accounts.
It’s considered ideal that you don’t have more than two credit accounts at a time as you can not only easily handle those accounts in terms of managing multiple billing cycles but you will also be able to repay on time, thus avoiding any scenario of default.
You must avoid applying for multiple loans within a short duration. The Singapore Credit Bureau assumes this situation as a sign of bad financial situation.
Each time you apply for a loan or a credit card, the bank checks your credit report or score. This is not good for your credit report as they will be several enquiries pinned to your report within a small duration. Banks might see it as a sign that you might have defaulted on your previous loans and so you want to apply for more new loans. This puts the bank in a situation of risk when they approve your loan request.
If you have already been denied approval on a loan application, you must not immediately apply for another loan as banks might consider this as a case of credit desperation. Such a situation only affects your credit report for the worse. In this situation, you must ideally wait for a month or two before you make an enquiry for another loan. It would also help you if you regularly keep checks on your credit report and compare interest rates between loans and credit cards before placing any application request. You can obtain this report easily from the Credit Bureau Singapore.
It’s important that you make repayments on time when you apply for a loan to maintain a good credit report. There’s also a minimum repayment amount applicable on credit cards and lines of credit, payable before the end of each billing cycle.
Besides, banks usually charge a late payment fee when you fail to make repayments on time for these loans. In case of credit cards or line of credit, this fee will be charged in case you fail to even pay the minimum repayment sum every month. This will, in turn, affect your credit report and affect your creditworthiness for the worse. Additionally, as you fail to repay the amount on time for a particular month, it will only add up for the amount payable in the consecutive month. You might not be able to cope with the additional amount that you have to pay in the consecutive month and this eventually leads to a situation of debt, further affecting your credit report.
You can reduce the negative impact on your credit report by striving to make timely repayments. Your credit report is bound to improve over a year if you’re already making repayments on time. As a last resort, you can get in touch with your bank in advance to seek assistance on this matter or to seek an alternate mode of repayment.
Unsecured loans don’t put forward collateral demands when you apply, and in case of a default the bank usually writes it off. For instance, the bank usually treats any default or inability to make repayments on a credit card loan and most personal loans as a scenario of loss. This situation is never good for your credit report even though the bank or the lending organisation decides to write it off.
If you default on repayments even once, your credit report will reflect that for several years to come. It affects your creditworthiness and when banks see this, they assess your application as a situation of risk. As a result, you might be denied the loan amount you would have requested for. Depending on the bank, your loan application request might also be disapproved. Moreover, it will take a really long amount of time to reverse such a damage caused to your credit report, even if you default only once.
Your credit report is affected adversely by any instance of bankruptcy or legal complexities faced. In this scenario, banks don’t easily offer loans to you. The bankruptcy is removed from your credit report only five years after you have received an official letter of discharge from the Court.
It’s quite evident that you need to maintain a good credit report in order to get your loan application(s) easily approved in the near future. In case you fail, you might not only be granted reduced loan amounts but at times, your application could also be rejected. A good credit report assures the lender of your ability to repay the loan, besides convincing them about the risk being lesser when they approve your loan application. You must also monitor your credit report obtained from Singapore Credit Bureau on a regular basis in order to keep track of your credit profile as well as to avoid any instance of erroneous entries.
You will find several ways of improving your credit report as we discussed earlier. You must avoid applying for too many loans at the same time. You must always strive to make minimum payments or monthly payments on time so as to avoid any instance of late payments or other unnecessary charges. You must never default on your loans as the damage caused in this case takes years to be mended.
Ideally, re-think about the purpose for which you need the loan. If you can find another source of finance, for say, loans from your family or friends, it might work out as a cost-effective decision. You should only apply for a loan when you really run out of these options. Furthermore, if you’re finding it difficult to manage your loan, you must get in touch with the bank as they will surely assist you in such a situation.