Accessing a loan from financial institutions could be simple. It can also be a difficult process based on your credit score. This means your probability of your being able to pay back the loan. The lending process is risky for banks as well as licensed moneylenders. This is because there is a possibility that the cash might not be returned.
The criteria used to determine a clients credit rating is based on facts. Since others are based on past experiences and assumptions. Borrowers with a low rating may be unable to easily get loans. These individuals might turn to loan sharks to get loans. This is despite the reality that they are illegal moneylenders.
Therefore, It is advisable that you consider several factors. These are factors that bring about your being blacklisted by financial institutions. You need to work on those that are within your control.
What a Credit Rating Is
Credit rating is a letter used by financial institutions. They use it to determine whether to approve your loan application. This is a joint endeavour between all major money lending institutions. These are where all data regarding customers credit record is pooled together. This is later aggregated.
Using the aggregated information, lending institutions can access the records. These records do indicate how many accounts you have. This would be those you hold from different banks. The credit history also shows your payment records.
Once the available information is calculated. Every Singaporean account holder is thus given a credit rating. This rating shows the type of a borrower you are. That is a good or high-risk borrower you are to banks as their customer. The higher the rating (AA rating and up to 2,000), the healthy your credit rating.
Although the exact computation of your credit rating is not public knowledge. There are a number of factors used by the Singaporean Credit Bureau. This is what helps them determine your credit rating:
Factors That Can Affect Your Credit Rating
The Outstanding Credit
This has a direct effect on your ability to repay the loan. When you currently have some existing loan. Yet you have promptly been making the monthly remittances. All this is reflected using a higher rating.
For Singaporeans who do not have existing loans are not as credible. This is because potential moneylenders do not have the information they need. This is the borrower’s ability to repay loans.
The Number Of Credit Inquiries
This indicates all the inquiries you have made with moneylenders. Regardless of whenever you take out a loan. The licensed lender will look at your rating. This is recorded on your account at all times. Later the licensed lenders can check how many times your history was queried. Therefore, based on the number of inquiries made. Then will they decide to approve your loan.
The many times you appear in the report, the lower the likelihood of your getting a loan. The interpretation of the many inquiries you have made. It can only indicate that you have attempted to secure loans. This will be from different lenders without you being successful.
The Repayment History
Most lenders often start by looking at your credit records. Through this, they look out for indications of loans acquired. This can be loans applied for in the past from other institutions. In addition, they make sure to note whether you repaid promptly.
When you still have existing loans, they do check your promptness. That is whether you submit your monthly instalments on time. Individuals that have positive and long credit history most likely have a healthy rating. This is when compared to borrowers who have shorter credit records. This also affects those that hold a record of unpaid loans. This is including penalties accumulated from late payment.
In some occasions, age can also be used as an aspect of creditworthiness. Banks and licensed money lenders do prefer middle-aged borrowers. These are people who are not beginning their careers. Also, these borrowers are not about to retire. The main thought behind this factor is the risk involved. This is because individuals in their 20s and early 30s have wild ambitions.
For this reason, they are considered to be probable to make wrong financial choices. In making such decisions will only leave in debt. More so debts that they are not able to repay. On the flip side, Singaporeans in their fifties could retire within few years. Therefore, they might not be in a position to finish repaying their debts.
Why You Need to Maintain A Good Credit Rating
Many banks will loan depend on your credit rating. This is before they decide on choosing to extend any credit to you. Even then, maintaining a good credit rating will be helpful for you. It will make it easy for you to access loans and credit when needed. This can include both car and housing loans. This is in addition to accessing personal loans and credit cards.
Banks and moneylenders will use the credit rating. This will help them gauge if you are a right customer for them to retain.
For instance, lenders might base the decision on the records. Such as whether they should waive your renewal fee for the credit card. This will be on the basis of your card usage. Every lender has their own discretion. This is will be on ways in which the CBS rating will help them make decisions.
Having a good score will act as evidence. This shows that you are reliable as a borrower. Therefore, get to know your score. Be sure that you improve it by making timely payments for your bills.
Finally, borrowers need to always monitor their repayment and borrowing. This will ensure that their rating stays high. This way they reduce the chances of being turned down for credit. Elements such as age are a natural occurrence.
Although it could reduce your credit rating by a small fraction. Lenders will not turn down their clients for a loan due to this factor. Your whole credit rating is often a combination of several other factors.