There are common mistakes that can ruin your credit rating in Singapore. This will prevent you from accessing mortgages, credit cards and bank loans. Your credit rating is important when you are seeking payday loans. Therefore you will be surprised when some of those little things you do affect your credit rating for the worse.
How Credit Ratings Are Calculated
The credit score is calculated using an algorithm. The algorithm is kept secret, to ensure the method can’t be imitated by others. Hence, the exact details aren’t known in how the credit rating is affected. Though, there is behaviour that can affect your final score.
The Credit History
When your history shows reliably in making repayments, your credit score will be good. This affects many key financial decisions. For instance, when you want to buy a flat, the bank might lend you about 80% of this flat’s value. But holding a bad credit rating, you might only receive 60%-70%.
When you haven’t used any credit, your rating will show Cx. This isn’t desirable since banks aren’t able to tell of your history, thus you are an unidentified risk. It’s equally possible that you may not get complete financing for the flat when no credit history exists at all.
For best results, get at least a credit card to use for payments only (that is you repay it in full). In so doing you’ll build your score and avoid any sort of interest.
Applying For Numerous Loans Within A Short Time
When you apply for multiple moneylender personal loans in short order (example you request for 3 personal loans within a month), your score will drop. When you take several loans within a short period, It’s assumed that your monetary situation is spiralling out of control (or is almost).
Mostly this happens to first-time home buyers, who borrow moneylender personal loan to take care of the down payment in addition to their home loan. You might go around this by saving enough cash for down payment. You could use the HDB concessionary loan that allows you to cover whole down payment using the CPF.
When taking payday loans, calculate the amount you need and get it on one loan. Do not get a small loan, then after you realize it’s not enough you get another one later.
Owing Lots Of Money Or Having Multiple Credit Accounts
Your credit score gets worse, each time you owe more money at present. You also need to realize that the number of varying accounts you own matter as well. When you do not owe much, yet you owe little-scattered amounts across 6 credit cards, personal loans and two credit lines, the credit score might still be fairly bad. It is for this reason that it is not advisable for you to own more than 2 credit cards (it can be confusing to track the many billing cycles).
Regular Late Payments
Credit line and credit cards require the minimum repayment prior to the end of a billing cycle. The amount is often 5 percent of the owed amount or S$50, whichever is higher. A number of loans, like the student loan, car loan, may attract fixed repayments. When you are late on the minimum for over 30 days, you’ll be considered an offender. When you repeatedly incur late charges (around S$60), it is possible your credit rating is showing delinquency.
In order to fix this, be sure to make prompt, reliable repayments. Doing this for a period of about one year, your credit rating will improve. When you realize that you will be late with your repayments, be sure to call your moneylender in advance to inform them. The lenders are at times ready to come up with an alternative method of repayment that works for you.
Submitting Too Many Credit Cards And Loan Applications At Once
When you would like to submit requests to several lenders and later decide on a lender that you will finally get a loan or card form, then you are mistaken. Each time you request for credit from lenders – not considering if you’ve completed the request process or not – your lender will check your credit rating. When there are several inquiries made within a short period, the credit score will drop. Such a situation is known as being “credit hungry”, thus it’s assumed that you are under some type of financial trouble.
When you’ve been rejected for loans, try and wait for a month before submitting another loan inquiry. Don’t contact several moneylenders within a span of a week. This shows your desperation for credit. It’s thus essential to confirm your credit rating with the Singaporean Credit Bureau in advance. Also, ensure you compare interests between credit cards and loans before submitting any applications.
Having Pending Litigation Or Being Declared Bankrupt
When you are declared bankrupt, or facing legal complexities (such as being sued), many moneylenders will not offer you credit. You might still be able to access small loans of about S$500 or even less since your credit rating is not normally checked for such amounts.
When you’ve been released from bankruptcy – this means you have received an official discharge letter from the Court – the insolvency will be lifted from your credit record after 5 years. It’s possible for you to check your credit record through Credit Bureau Singapore at a fee of S$6.50.
Defaulting On Loans
Defaulting often occurs when your money lender cancels your debt. For unsecured loans, like the credit card loans as well as most personal loans, don’t require any collateral – when you cannot repay them, your lender will just have to consider it as a loss. This isn’t a good sign.
Any default will certainly ruin your credit rating for some years to come since it will reflect on your report indefinitely. It happens that there are a number of people who won’t be able to purchase houses or pursue their degree, due to a default ruined the possibility of them getting a loan. Therefore, do not be one among them.