A Beginner’s Guide To Clearing Your Bad Credit History
Your credit history can make or break your next life milestones. Whenever you submit an application for a loan or any financial product, lenders check your credit report to gauge your ability to repay debts. This is why it’s so important to know how to clear bad credit history in Singapore.
If you have a bad credit history, you may not be able to qualify for a personal loan, renovation loan, or mortgage loan. Taking the time to identify factors that impact your credit history is one of the major steps you must take to get it back in shape. But how exactly can you do this? Find out below.
Here at OMY Singapore, you will discover the following:
What Is Credit Score In Singapore?
Before you know how to improve credit score Singapore, you first have to know what it is.
Your credit score is a four-digit number derived from your previous payment history on loan accounts. This number ranges between 1000 and 2000 and indicates whether or not you’re at risk of defaulting any loan product.
If your score is near 2000, it’s a good thing. It means you’re at the peak of your financial health and your risk of defaulting your loan is close to zero or none at all. This also means you’ll enjoy faster loan approvals and lower interest rates from banks.
But if your credit score is closer to 1000, it suggests that you’ve had a bad history on your previous loans and you’re at risk of defaulting on your loans.
|Risk grade Probability of default
|1911 – 2000
|AA ≤ 0.27%
|1844 – 1910
|BB 0.27% – 0.67%
|1825 – 1843
|CC 0.67% – 0.88%
|1813 – 1824
|BB 0.88% – 1.03%
|1782 – 1812
|EE 1.03% – 1.58%
|1755 – 1781
|FF 1.58% – 2.28%
|1724 – 1754
|GG 2.28% – 3.48%
|1000 – 1723
What Causes Bad Credit Score In Singapore?
One of the first steps you must do in learning how to clear Credit Bureau Singapore is to know what causes a bad credit score in the first place.
There are many factors that contribute to a bad credit score, although there’s no fixed criteria on how each factor impacts your overall score. Take a look at these factors to understand why your credit rating Singapore has dropped:
- Too many loan applications
- Negative loan history such as incomplete or late repayments
- Delinquency or any criminal activity
- Lack of positive loan history
- Immature credit history or when you don’t have enough history to establish your credit score Singapore
- Using up over 30% of your credit limit
- New or recent credit
- Credit exposure or frequency of borrowing
What Makes Your Credit Rating In Singapore So Important?
Why do people make an effort to learn how to clear their bad credit history in Singapore? What makes it so crucial?
Simple. Many Singaporeans borrow from banks to finance major purchases. If your credit score doesn’t look good, you may not be able to take out a loan to finance your dream business, dream home, dream car – the list goes on. The same goes for applying for credit cards, applying for an education loans, and a lot more.
Additionally, there are also tons of employers in Singapore who do pre-hire checks with Credit Bureau Singapore. Considering this, your credit report in Singapore can help you get hired, especially if you want to work for a financial institution.
More From OMY: Best Licensed Moneylenders In Singapore: Guide To List Of Reliable Lenders
How to Get My CBS Report in Singapore?
You may think getting your credit report in Singapore is hard, but it’s actually very straightforward. You can just get it online from Credit Bureau Singapore or CBS for S$6.42, inclusive of GST. You can pay through any major payment channel like Mastercard, Visa, or eNETS.
You can also get your credit report from any of these offices from Monday to Friday, 9 a.m. to 6 p.m. (closed on Public holidays and weekends):
- Credit Bureau (Singapore) Office
2 Shenton Way, #20-02 SGX Centre 1, Singapore 068804
+65 6565 6363
- SingPost Branches Islandwide
- CrimsonLogic Service Bureau
133 New Bridge Road, #19-01/02 Chinatown Point, Singapore 059413
+65 6538 9507
- Supreme Court Lane, Level 1, Supreme Court Building, Singapore 178879
+65 6337 9164
You can also check your credit score in Singapore for free by applying for a new credit card/loan facility with any CBS Member. Most lenders in Singapore are affiliated with this bureau. After doing this, you’ll get a notification from your provider about whether or not your application has been rejected or approved. The letter will contain your instructions on getting a credit report from CBS within 30 calendar days.
How to Clear Bad Credit History Singapore: Easiest Ways You Can Do It
Here are some tips you can follow on how to increase your credit score in Singapore. Before you do any of these tips, you must be aware that increasing your credit score Singapore won’t happen overnight. Generally, this will take around 12 months, although it may be shorter or longer depending on your financial circumstance.
But as long as you keep following these tips, you’ll see that your credit rating Singapore will improve over time.
Repay loans on time
If you have loans, make sure you repay them on time and in full. Late or non-payment of loans are all recorded on your report and will affect your credit score Singapore.
Success and consistency in repaying your loans guarantees that you have a good banking record with all the institutions that you have your loans with. In the event that you want to take out another loan in the future, your history of repaying loans on time will be a big plus.
Try your best to never default on your loan payments
If you want to know how to clear bad credit history Singapore, this is one of the most important tips you should follow. Make sure you don’t default on your loan payments. In the event that you default, it will be reflected in your report indefinitely and this can hurt your chances of getting approved for a loan in the future.
If you are unable to pay the full balance of your loan, at least try to pay the required monthly minimum. This is enough to keep your credit rating Singapore positive.
Keep your Credit Utilisation Ratio low (below 30%)
Your credit utilisation ratio is how your credit card balance compares to your overall credit card limit. Lenders make use of this ratio to evaluate how you are able to manage your finances. Generally, you should have a credit utilisation ratio of less than 30% and more than 0% if you’re serious about learning how to clear your bad credit history in Singapore.
For instance, if you have two credit cards both with a S$2,000 limit each, and a S$500 unpaid balance on one card, your CUR is 12.5%. This is derived by dividing your total debt (S$500) by your credit limit (S$4,000).
Don’t apply for multiple loans at a time
Lenders will take a dim view of you applying for multiple loans in a short span of time. This is because a person with good credit is reasonable enough to know his or her financial capability.
You should avoid applying for multiple loans at the same time. Instead, apply for a loan only when you are absolutely sure you can pay back the loan with the money in your bank account.
Getting multiple loans will only increase your debt and will cause your credit utilisation ratio to increase.
Don’t apply for loans you can’t afford
Just because you have a bad credit record doesn’t mean you can’t apply for loans. However, it is important that you only apply for loan amounts that you are able to pay back if you want to know how to increase credit score. This is to prevent your debt from increasing.
Having too much debt makes it hard to keep up with repayments, and the higher your debt is the more you owe on your interest. This only adds up to the stress of having financial problems.
What Happens If There’s An Error On Your Credit Report?
One of the best ways in knowing how to clear bad credit history Singapore is by double-checking your report. If you spot an error in your credit report Singapore, you can write to the credit bureau. To remedy this, they will speak to your bank about the data, and label your report with a notice that your data is currently being disputed or is under investigation.
After some time, you will be informed of the investigation result, and if there are changes to your credit report, a new one will be sent to all banks who have made credit inquiries about you in the past 3 months.
What Cannot Be Cleared In Your Credit Report Singapore?
Unfortunately, many people are dealing with a bad credit rating caused by more than just late repayments. This could be debt management programs, defaulting loans, or bankruptcy. Keep in mind that these records will be reflected in your report for 3 years. Meanwhile, bankruptcy records will stay on record for 5 years. So even after you’ve solved these, you may still face its repercussions for the next few years.
When it comes to credit reports, the status of your debt management program or bankruptcy will be revealed, whether it’s in progress or you’ve been discharged from it. Here’s what you don’t want to see in your credit report:
- H code means involuntary closure of your account that has an outstanding balance
- R / S codes mean the bank has closed your account or credit facility, and you’ve settled/restructured your debt
- W code means a lot that was defaulted, which is the worst code you can have
A Word From OMY
Now that you know how to clear your bad credit history in Singapore, you’re finally one step closer to having a positive financial standing. Every time you get approved for a loan or use your credit card, take it as an opportunity to bring your credit rating in Singapore back into shape.
Consistently pay your dues, and if you are at risk of defaulting on your loan, try your best to negotiate more flexible terms with your lender.