5 Practical Ways to Boost Your Credit Score
Credit scores are important because they determine whether or not you qualify for loans, mortgages, and other financial services. If you want to improve your credit score, then follow these five simple steps.
Your credit score is determined by three main components: payment history, amount owed, and length of time since last loan. The higher your score, the better your chances of receiving favorable terms from lenders.
To get started, read our guide below on how to improve a good credit score.
How To Determine Credit Risk Grades
An algorithm that records credit utilization in Singapore determines a person's credit score. Any Singaporean can obtain a credit report with credit score from the Credit Bureau of Singapore. And it costs S$6 only. See below table for credit risk grades provided by CBS.
| Rating | Score | Default Probability |
| AA | 1911 – 2000 | < 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 | > 3.48% |
Defaults are indicated by a risk grade of DD or lower, whereas late payments or delinquency are indicated by BB or CC (where the bank was forced to write off the loan).
For those who have never borrowed money or used a credit card before, as well as those who have been declared bankrupt, there are also ungraded credit ratings available. For example, an ungraded score of Cx or no credit grade at all (including situational credit report).
A Good Credit Score: What It Means For Businesses
A good credit score can be the difference between success and failure in Singapore as it is the main factor that banks use to assess whether a business is creditworthy. It can also affect whether a business is granted loans, how much they pay for goods and services, and even how much they pay for insurance.
First off, the ability to get loans from banks depends on a company’s credit score. A company with a low credit score will not qualify for loans from most banks. The interest rates of these loans will also be higher than those with high scores.
Secondly, companies that have low scores are sometimes required to post collateral or guarantors when applying for trade finance or other types of financing such as letters of credit.
Thirdly, many businesses rely on suppliers who provide goods or services on credit terms - this means the company needs to have an established history of paying its suppliers on time so that they continue to do so in the future. If a company does not have a credit history, suppliers may refuse to provide goods or services on credit terms. Lastly, insurance premiums can also be affected by a company’s score. For example, if a company has had previous claims from the same insurer or has been rejected by an insurer due to their credit rating they will see an increase in the cost of their premium.
Some of these issues are mitigated by having a good credit score:
- Paying off debt on time
- Keeping balances low
- Avoiding late payments
- Not applying for loans that are not needed
- Never default on your loans
Paying Off Debt On Time
The best way to boost your credit score is to make sure you always pay back your debts on time. This includes any personal loans, credit cards, car loans, home loans, etc.
If you miss a payment, contact your lender immediately and explain why you missed the payment. You should also try to negotiate with them to reduce the amount you owe.
Keeping Balances Low
It is important to keep your balance low because it affects your credit score. When you carry a large balance, it shows that you are using more of your monthly income than what you need to live comfortably.
This could lead to problems later down the line. Banks will look at your credit score and decide whether or not to give you another loan based on how much you already owe.
Avoiding Late Payments
Late repayments can lower your credit score. Make sure you only apply for new loans once you have paid off outstanding loans.
If you're trying to improve your credit score, focus on making all your repayments on time and paying off any balances you have each month. It takes a while before any changes will show up in your credit report, but it'll be worth it in the end!
Not Applying For Loans That Are Not Needed
In some cases, you might not need a particular loan. However, if you want to improve your credit score, then it is better to apply for all available options, i.e. major loans, rather than just the ones you think you need.
For example, if you are looking to buy a house, you might consider getting a mortgage instead of taking out a personal loan.
However, if you don't need the money right now, then it's better to wait until you actually need it.
Never Default On Your Loans
Defaulting on your loans is the worst thing you can do to your credit score. It shows lenders that you cannot handle financial obligations and that you are irresponsible.
When you major default on your loans, you lose the opportunity to build up positive information about yourself.
This makes it difficult for you to get approved for new loans in the future.
Additional Information
Insurance premiums can also be affected. Companies often use credit ratings to determine the price of insurance premiums.
If you have a poor credit score, insurers may charge higher rates.
To help boost your credit score, you should take steps to ensure that your credit report contains accurate information.
Conclusion
Improving your credit score is an ongoing process. If you want to see real results, you must continue to monitor your credit reports and act accordingly.
Remember that there are many factors that go into determining your credit score. The most important factor is your payment history.
If you have made timely payments on all of your accounts, then you should expect to see improvements in your credit score over time.
Importantly, focus on paying down debt and building positive payment histories. Finally, pay off balances every month and don’t miss payments. These actions will help you raise your credit score over time.
Read also: Comprehensive Guide To Different Debt Types: Good Vs Bad Debts
Read also: Understanding Your Credit Report from Credit Bureau Singapore - Business Owner Edition 2021
Read also: 5 Ways To Build Business Credit in Singapore 2021
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