Where to Apply for a Loan if You Have a Bad Credit?
Loan applications are stringent in themselves, with eligibility criteria and lots of requirements. Coupled with a bad credit score, this may be more difficult and almost impossible to achieve with lending institutions such as banks. However, it is not completely impossible to get an approval with that kind of situation.
Understanding how credit scores work and how they are used by different lending institutions can help you get a loan application approved, even with a bad credit score. Knowledge about this topic will also help you improve your bad credit score later on, which will help even more in your subsequent loan financing approvals.
Understanding Credit Score
Your credit score shows your reliability and trustworthiness as a client, which can affect your application for a personal loan in Singapore positively or negatively. Credit scores are used in the assessment of any credit application and will ultimately have an influence on its approval or rejection.
It is determined using various indicators: the amount of existing credit that you have, number of recent applications for new credit, previous late payment on loans, length of credit history, available credit facilities, as well as the number of credit applications and inquiries into your credit score.
A credit rating in Singapore will range from 1000 to 2000, and higher numbers mean a more positive credit score. It also has eight corresponding risk grades from AA to HH, with AA being the highest and HH having the lowest grade. These risk grades offer probability percentages of default in applications.
| Score Range | Risk Grade | Probability of Default | |
| Min | Max | ||
| 1911-2000 | AA | 0.00% | 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% | 3.46% |
For example, a credit score of 1000 is considered as the worst credit score, and falls under the credit risk grade of HH, entailing a minimum probability of default at 3.46% and a maximum of 100%. On the other hand, credit scores within 1911-2000 fall under the AA credit grade, with a minimum probability of default at 0% and a maximum probability at 0.27%. Scores within the AA credit grade are the best scores to have in Singapore.
Aside from these risk grades, there are some “ungraded” credit rating types that also exist.
- HX: Public Record (Litigation Information).
This signifies a past and/or existing writ of summons/bankruptcy record filed against the borrower.
- HZ: Outstanding balance of >$300 not paid in >90 days.
This grade is given if outstanding balances are greater than $300 and has not been paid for more than 90 days. It can also mean a default or a loan repayment renegotiation has happened.
- GX: Inquiry Record Only .
This grade means that someone tried to check the credit record, but found no information. It is likely that the owner of the record has not used any credit yet.
- BX: Inactive
This means that all the borrower’s accounts have been closed already.
- CX: Insufficient Credit Activity
This means that the credit file is thin, and that there is very limited information, so the system cannot give a credit score. This is common for foreigners and first-time loan applicants.
Importance of Credit Score
The importance of a credit rating varies between applications made with banks and applications made with licensed moneylenders.
Banks will almost always require good credit history because of their higher maximum loan amount offers, while licensed moneylenders will only take them into consideration, which means that you can still get a loan with moneylenders even with bad credit rating as long as you are okay with having high interest rates.
However, even with licensed moneylenders approving loans with bad credit rating, the maximum loan amount can still be affected with decrease, even as soon as a borrower reaches the BB credit grade. Not to mention losing access to good interest rate deals because of a bad credit rating.
How to Get a Loan if You Have a Bad Credit Score?
1. You can take a loan from moneylenders
Unlike banks, moneylenders do not consider your credit rating to be the definitive factor in approving applications. Your loan application with moneylenders can still be approved even with bad credit scores, although it will be restricted at a lower maximum loan amount with corresponding higher interest rates.
2. Get a guarantor
Having a guarantor gives some assurance to moneylenders that the loan will have another source of repayment in the case that the debtor is unable to repay, or has bad repaying habits as seen in the bad credit ratings.
3. Take out a home equity loan
Home equity loans will essentially make the house of household owners as collateral for a given loan. Same with having a guarantor, this provides another way of loan servicing or repayment in favor of the moneylender.
How Long Will It Take to Build Credit Score?
Credit Bureau Singapore will consider your credit score clean once they have evidence that you have made on-time repayments for 12 months.
Therefore, you can correct your credit score by changing your repayment practices and making all monthly repayments on time. Abide in these practices for 12 months, and you will effectively clear out individuals’ bad credit history with financial institutions.
Helpful Ways to Build Credit Score
There are several ways to improve your credit score, and you need to make sure to follow all these steps, rather than following just a single way. As said above, there are multiple factors that are taken into consideration in the computation of your credit score, so it is important to achieve good results in all factors.
1. Pay your bills on time
This is a very straightforward way to improve the credit score of individuals, as this improves your reputation as a debtor.
Avoid making late payments and always repay the minimum sum for credit cards before the end of the billing cycle. For loans, let the respective bank or licensed moneylender know in advance if you cannot pay back on time.
You can also try to seek help from a credit counsellor. A debt restructuring is also one of your options, which will do less damage to your credit ratings than a default. If you have a bad credit score, try to apply for consecutive small personal loan amounts first with money lenders and pay them each on time.
2. Pay off debt and keep balances low on credit cards
Even with regular payments, having outstanding balances in your lines of credit can still affect your credit ratings and can prevent you from acquiring more credit. Financing institutions will not offer you more credit if you are in the process of other loan servicing. Keep them low or pay them off if you have the resources available. You may also try applying for debt consolidation plans to have lighter loan payments.
3. Don’t close unused credit cards
This might seem contradictory to the idea of minimizing credit to improve credit ratings, but as long as the outstanding balances are very low or non-existent, it can be useful to keep them open. This will serve as evidence of a good borrowing and repaying habit, which will help increase your credit ratings.
4. Don’t make multiple hard inquiries
If you keep on submitting multiple loan applications within a short time, you may be viewed as a reckless debtor trying to acquire debt more than your commitment to pay. If possible, spread out your applications across time. Do not apply for multiple loans and enquiries at a single moment.
5. Dispute inaccuracies in credit reports
Check your credit history and attempt to correct any mistakes in your record. You may contact CBS at + 65 6565 6363, or visit their office address at 2 Shenton Way, #20-02 SGX Centre 1, Singapore 068804. You can also send them an email at consumer_services@creditbureau.com.sg.
What if You Don’t Have a Credit Score Yet?
1. Apply for a secured credit card
This involves depositing a given amount of money in a bank, which is then treated as collateral for the credit card. While it has no difference with having the same amount as cash-on-hand, depositing the amount for a secured credit card application will treat it as a part of individuals’ credit history, because secured credit cards are also a type of credit facility. Therefore, good spending habits with a secured credit card will net you a positive effect on your credit ratings.
2. Become an authorized user on someone else’s credit card
This will help you build good credit ratings, minus the burden of repaying a credit facility if the primary owner of the credit card has good repaying habits and will not require you to pay off the credit. This means that you are reaping the benefits of their repaying habits by just having your name in the ownership details.
3. Use your rental data (if you are renting)
In essence, rental payments act like a loan repayment. By showing your tenancy agreement, along with evidence that you have repaid your rental installments on time, this will positively reflect on your identity as a debtor and will give an impression that you are responsible enough to pay your financial accountabilities.
4. Apply for a personal loan
Applying for a personal loan with licensed moneylenders is possible for first-time loan applicants in Singapore, as long as individuals can provide proof of income and other requirements that will show their capacity to pay for the loan.
Depending on the minimum income that a debtor has, the maximum loan amount will change. Here is a table of standard Singapore moneylender personal loan maximum loan principal for an unsecured loan:
| Annual Income | Singapore Residents/Singapore PRs | Foreigner Individuals |
| Less than $10,000 | $3,000 | $500 |
| At least $10,000 and less than $20,000 | $3,000 | $3,000 |
| At least $20,000 | 6x the monthly income | 6x the monthly income |
Closing
The possibility of getting an approval for your loan application despite having bad credit scores still exists, as long as you know how to compensate for it in other ways, as well as how to improve it as time goes by.
Now that the basic information about loan applications and bad credit scores are already discussed, it is important to know which loan company is best for bad credit scores. Typically, the best choice to get a loan application approval in this situation is to apply with licensed moneylenders.
However, in the case that you want to try applying for a loan with a bank, HSBC Personal Loan is your best pick for personal loans in Singapore, offering the lowest interest rate at the moment at 3.7% per annum, with a $0 processing fee. Its Effective Interest Rate (EIR) of 7% p.a. is also the lowest on the market.
As a final note, always remember that no matter how bad your credit score is, there are ways to improve it. As long as you make an effort to undertake these ways, you can correct your credit score within a year, based on CBS reporting of 12 months.
