A credit score is a highlight of your financial habits and status. It is most significant when you need to take out a loan or apply for credit at a money lender or bank. A good credit score is beneficial as it increases the approval rate for credit applications, and reduces the interest rate charged to you. In contrast, a poor score will make it more difficult for you to get loans approved, and increases the interest rate on credit sources to you.

In Singapore, a person’s credit score is a 4-digit number, affected by things such as one’s credit history, credit utilisation ratio, occurrences of delinquency (e.g. late or missed payments), amongst others. You might have unknowingly impacted your credit score with some of your credit usage habits – so here are some tips to help you maintain your credit score in the healthy numbers:

• Make prompt payments

One of the biggest reasons for a low credit score is late or missed payments on credit cards or loans. Defaulting on payments gives the impression that an individual is not reliable or that they are financially incapable. Thus, banks will usually not approve loan applications by individuals with poor credit scores.

If you want to keep your credit score in the healthy range, making prompt payments is crucial. You can use a reminder system to help you, and automate payments wherever possible. If you are currently in significant debt, you can get a consolidation loan from an approved debt consolidation company in Singapore. This streamlines your debts so it is easier to keep track of payments.

• Be patient

A credit score typically takes into account the past 12 months of credit activity. Thus, if you had a poor credit score and are trying to fix it, it will take time. Additionally, an established credit score is better than a limited or non-existent credit score. So, you might want to wait to build up your credit score to an AA grade before applying for a major loan to ensure you get the best rates.

• Monitor your score

It may be frustrating to wait patiently for your credit score to build back up without being able to see the process. You can use Credit Bureau Singapore’s ‘My Credit Monitor’ service to keep track of your score. The service tracks your score daily and updates you whenever it detects any significant changes. This lets you track your goal and manage your progress effectively.

• Don’t open too many lines of credit

Having too many open lines of credit isn’t very beneficial to your score, as it increases your likelihood of losing track of billing cycles, leading to missed payments. From a general financial standpoint, it isn’t a good idea as well, as you will have to pay more in terms of administrative fees and interest fees by having too many loans, cards, or other credit lines.

Keep your personal lines of credit to 5 or less. If you find other credit sources with more attractive rates, make it a point to close off one account and transfer to the new one.

• Space out your enquiries

Multiple lines of credit aren’t the only thing hurting your score. Did you know that even enquiring for new loans or credit cards can make your score suffer? Making too many enquiries in a short period of time make you look ‘credit-hungry’, which are alarm bells to any lending institution.

Whenever you are going to a licensed money lender for debt consolidation or personal loans, it is a good idea to space out your enquiries – or do your research by other means before making an actual application.

Conclusion

You should know that building your credit score takes time, so you shouldn’t be in a hurry to do so. However, if you consider these tips, you should see significant differences within a couple of months to a year.