What is a credit score?
A credit score is a numerical representation, typically four digits, that reflects your payment history on loan accounts. It is generated using an algorithm that considers your current credit information, and the score may vary over time as your credit data changes.
The score range is from 1000 to 2000, with a higher score indicating a lower likelihood of defaulting on payments. A score of 1000 in your report suggests a higher risk of delinquency, while a score of 2000 indicates a lower probability of experiencing payment difficulties.
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Why does your credit score matter?
Your credit score affects your financial life in many ways. Here are some of the key reasons it’s so important:
- Loan approvals: Lenders check your credit score when you apply for credit. A high score increases your chances of approval and can lead to better loan terms.
- Interest rates: Applicants with higher credit scores qualify for lower interest rates, saving substantially on credit costs over time. Just a few points difference in your score can affect your rate.
- Deposits: Many utilities and cell phone companies use your credit as a factor in determining deposit requirements. Good credit means paying lower or no deposits.
- Rental applications: Landlords often check credit to screen rental applicants. Better scores can improve your chances and terms for renting.
- Insurance rates: Insurers view credit scores as an indication of responsibility. High scores can lead to lower premiums.
- Employment: Some employers check credit as part of background screening. Poor credit doesn’t necessarily disqualify you but may raise questions.
Your credit score has a concrete impact on how much it costs to borrow money and your access to credit. Maintaining a high score saves you money over time and opens up more opportunities. Monitoring and understanding your credit score lets you take charge of your financial reputation.
How is your credit score calculated in Singapore?
In Singapore, credit scores are calculated by two credit bureaus authorised by the Monetary Authority of Singapore (MAS): the Credit Bureau of Singapore (CBS) and DP Credit Bureau.
Any Singaporean can obtain a credit report from the CBS for a fee of S$8.72 including GST.
What factors influence your credit score in Singapore?
The factors that affect your credit score in Singapore include:
- Utilisation pattern: This refers to the amount of credit amount owed/used on accounts by individuals.
- Recent credit: Lenders may perceive that you are over-extending yourself if you have newly booked credit, so consumers are advised to apply for new credit in moderation.
- Account delinquency data: The presence of delinquency (late payment) on your loan accounts will reduce your credit score.
- Credit account history: Your credit history plays a significant role in determining your credit score.
- Available credit: This factor considers the amount of available credit and the amount used.
- Enquiry activity: Having too many enquiries in your credit report indicates to lenders that you are trying to take on more credit, which can affect your credit score. To keep your enquiries to a minimum, try to limit the number of loan facilities and credit cards you apply for.
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What is a credit report?
A credit report is a comprehensive summary of your credit payment history from all your banks, compiled by the Credit Bureau of Singapore (CBS). It is provided to banks, finance companies, and credit card companies when they inquire about your creditworthiness.
The credit report contains the following information:
- Basic personal information (excluding contact addresses and phone numbers).
- Records of all credit inquiries made on your behalf.
- Your credit repayment history over the past year, including any instances of late payments on credit card bills.
- Any records of defaults, if applicable, displayed from the date they were reported to the credit bureau.
- Bankruptcy records, if applicable, are displayed for 5 years from the discharge date. If you have fully repaid your debts, the Bankruptcy Order will be cancelled, and your bankruptcy record will be immediately removed.
- Details of closed or terminated credit accounts, displayed for 3 years from the reporting date.
- Aggregated outstanding balances.
- Aggregated credit limits.
How to check credit score?
Any individual in Singapore can acquire a credit report from the CBS for a fee of S$6, which includes their credit risk grade.
The top risk grade achievable is AA, while grades B or C suggest delinquency or delayed repayments, and grades of D or below often indicate defaults where the bank had to write off the loan.
Apart from the credit grades, there are certain credit scores that are classified as “ungraded.” For instance, if you have never utilised loans or credit cards, your score will be designated as “Cx.” Individuals who are currently bankrupt or involved in legal proceedings may also have an ungraded credit score, which will be indicated in their credit report.
