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How to Clear Your Bad Credit History in Singapore

How To Clear Your Bad Credit History

Singapore puts prime on a person’s credit history. Having a good credit score can open for you some access to various loan applications and credit cards. A bad credit score will not give you access to these types of loans in a similar fashion in a similar fashion.

Having a bad credit score, however, is not the end of the world. You can still remove a bad credit history by following some recommendations that can improve your credit score. But first, you have to learn about what a credit score is, how it affects you, what factors affect a credit score, and how to improve it.

What’s A Credit Score?

In Singapore, a credit score, also known as “credit grade,”  refers to the number given to people indicating their ability to repay their debts and default on payment. The Credit Bureau Singapore and Experian Credit Bureau Singapore (ECBS) collect and store information on individuals’ credit payment history.  Credit grades are categorized into different levels. 

Independent rating companies assess an individual’s credit scores by looking at the consumers’ creditworthiness.  CBS and ECBS are the responsible rating companies for banks and finance companies.  Moneylenders Credit Bureau (MLCB) is responsible for obtaining and storing information on individuals’ credit scores for licensed moneylenders.

How Does A Bad Credit Score Affect You?

  1. Getting Approved for a Loan Can Be Difficult

The likelihood of getting a new loan or credit application is dependent on your credit score. If you have a low score, it might be difficult to find a willing lender. A poor credit report will make it hard for you to apply for loans.

Likewise, different banks and financial institutions have their own preference for the levels of credit score. For example, there is no much difference between credit points of 699 and 701. But if 700 marks another level, then these three points can spell the difference between you getting a loan.

  1. Higher Rates and More Restrictive Terms on Approved Loans

Another bad effect is the imposition of higher interest rates and more restrictive terms on your loan agreements. While you may have been able to have your loan approved, chances are lenders impose higher interest rates, and some also place stricter terms in the contract that may be burdensome on you. 

In terms of interest rate, credit score still plays an important role. A single percentage may look minimal, but the truth can add tens of thousands of dollars to your total loan, depending on how it is structured. This is true to all kinds of loans, like home improvement loans, personal loans, and credit cards.

  1. Trouble Renting an Apartment

The effect is not limited to loan and credit applications; poor credit also affects your apartment rental options. Your apartment lease choices may be limited because landlords require a pre-lease credit check unless local laws forbid such practice. This behavior is understandable because landlords are prudent to check the likelihood of default of potential lessors.

Moreover, well-kept apartments and modern properties in desirable neighborhoods are only available to individuals with higher credit standing. Some bigger leasing companies also impose stricter standards as well. Certainly, these properties will be elusive to you if you have a poor rating.

  1. Difficulty Getting a Job or Security Clearance

You may not think of it, but some employers consider credit score checking in screening their applicants. Thus, if you are planning to apply for jobs, expect that there are chances that your credit report may affect your application. This applies even if you are not entering a finance-related career.

Some employers treat your credit score as a basis for your behavior. Those who have a low score usually miss deadlines and fail to fulfill their financial obligations. It is then fair for establishments, particularly financial institutions and government agencies, to consider the applicant’s credit before hiring him or her. 

  1. Difficulty Getting Approved for a Car Loan

The last adverse effect of a poor credit report is the difficulty of getting approved for a car loan. Having your own car gives convenience and saving for other expenses. However, if you have bad credit, most companies will not be willing to aid you with a car loan.

What Affects Your Credit Score?

  • Utilization Pattern

It refers to the usage pattern of the loan facility. In doing so, the credit bureau tracks down the frequency of how you spend your money. Banks usually consider how frequent and the timing of your loans.

This factor is considered in determining your credit score. Generally, there is reluctance on financial institutions to approve loan and credit card applications if they are concerned with your utilization pattern.

  • Recent Credit

In coming up with your credit report, the credit bureau looks at your recent account activity. Your credit facilities in any bank are considered as liabilities. If you have multiple accounts at one time, this may contribute to your credit score dropping.

  • Account Delinquency Data

This factor manifests your reliability as a customer. The credit bureau records any late or partial payments of your credit cards or other loans. These late or partial payments are considered delinquency behavior.

Financial institutions do not favor those who have a record of delinquency behaviors as it gives the impression that they are not responsible customers. You may lose their confidence in making future payments on time, depending on your account delinquency data. Surely, this data may drop your credit standing.

  • Credit Account History

How you dealt with previous banks or financial institutions also play an important part in determining your credit grade. Financial companies prefer someone who has proven that he or she deals with his or her obligation responsibly. Faith complying with all your debt obligations will help you boost your credit history.

  • Available Credit

Your current credits with any bank or institution are also considered. Having too many credits open is not advisable. If you want to improve your score, then maintaining only a few credit accounts. This includes your credit cards.

  • Enquiry Activity

When applying for a credit card, the financial institution would inquire about your credit score. Each inquiry will then be recorded in the system. Having too many inquiries in a short period of time signals banks to think that you are experiencing financial challenges or having too much debt to pay. This, of course, might affect your credit score.

How To Clear Bad Credit History Singapore?

  • Repay On Time

As a rule of thumb, you have to repay your loans on time and in full. This means you have to make your payments before you receive a demand letter for your late payment. Receipt of the second warning letter already causes your credit score to drop even if the bank waives the late payment fees.

Pay at least the minimum of your credit card bills before the billing cycle ends.  However, we advise that you settle your bills fully every month to save on interest for repayments. 

If you are certain that you cannot pay your loan on time, make sure to inform your lender timely. You may negotiate for a change in the repayment scheme. While this may still affect your credit rating, it will do less damage than late repayments.

  • Never Default on Payments

All your defaults are reflected on your credit report indefinitely. One default may make it impossible for you to get a  credit card, personal loan, or home loan. Thus, as much as possible, do not default on your payments as it surely causes a great injury.

  • Limit the Number Of Open Credit Facilities

There is a higher possibility that you get confused or miss out on repayment deadlines because you have too many billing cycles to monitor. It is a prudent practice to keep your credit facilities to no more than 4 or 5. Closing credit cards that are no longer in use also helps you save on the annual fee.

  • Avoid Applying For Unnecessary Accounts

Same with your credit cards, having unnecessary accounts will make it difficult for you to keep track of your obligations. To manage your finances better, it is advisable to limit your existing credit accounts. In this way, maintaining your credit score would be easier too.

  • Avoid Taking Multiple Loans Within A Short Time Frame

You are labeled credit hungry if you apply for multiple loans within a short time frame. This gives the bank impression that you are having financial troubles. Thus, we recommend that you spread out your loan applications.

Final Thoughts

Clearing your debts will surely improve your bad credit. However, sometimes this is hard to do especially when you are not expecting funds to settle existing obligations. Most money lenders or credit facilities do not grant loan applications to someone who has bad credit.

Fortunately, 365 Credit offers personal loans even to Singaporeans that can prove their ability to pay even with a bad or low credit score. If you want to know more about the different loans they offer, visit  365 Credit. Certainly, paying all existing loans is one easy way of repairing your bad credit grade.

About 365 Credit Solutions

365 Credit Solutions Pte Ltd is an established licensed moneylender since 2010 (formerly known as FLS Credit and Fu Lu Shou Credit), accredited by the Registry of Moneylenders in Singapore. We specialize in providing personal, payday, bridging, foreigner, business loans to Singaporeans & Foreigners working in Singapore.

 

Our mission is to help make taking a loan a simpler, more understandable process, and to educate our customers about their loan options in the event of an urgent need.

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