A credit report is essentially a bill of health for your finances.
On it, you can find your credit score which basically shows if you've been naughty or nice with your credit card bills and other debts.
Money lenders, be it banks or governmental institutions, rely on your credit report to see the likelihood of you repaying your debts to judge if they should lend you or not.
In this article, the Credit Bureau Singaporeanswers all our burning questions about credit scores, what the numbers mean, and how to fix a bad score.
What is a credit score?
A credit score is a four-digit number based on your past payment history on your loan accounts which ranges between 1000 and 2000. It indicates how likely you are to default on your loan (i.e. fail to repay).
|Credit score||Risk grade and probability of default|
|1911 to 2000||AA ≤ 0.27 per cent|
|1844 to 1910||BB 0.27 per cent to 0.67 per cent|
|1825 to 1843||CC 0.67 per cent to 0.88 per cent|
|1813 to 1824||BB 0.88 per cent to 1.03 per cent|
|1782 to 1812||EE 1.03 per cent to 1.58 per cent|
|1755 to 1781||FF 1.58 per cent to 2.28 per cent|
|1724 to 1754||GG 2.28 per cent to 3.48 per cent|
|1000 to 1723||HH 3.48 per cent|
If your score is nearer to 2000, you're in the pink of financial health, with a low risk of default.
If your credit score is closer to 1000, it means that you have a higher risk of defaulting on a payment.
To find out what your credit score is, you'll need to obtain a credit report from the Credit Bureau Singapore. You can see a sample credit report here.
How do I get a free Credit Bureau report?
The most straightforward way to get a credit report is to purchase it directly from Credit Bureau Singapore (CBS). It costs $6.42 inclusive of GST and you can pay by Visa, MasterCard or eNETS.
Alternatively, you can get it for free if you apply for a new credit card or loan facility with any CBS member (which most major providers are).
You will receive a notification from the provider informing you of whether your application has been approved or rejected. Either way, the letter will contain instructions to obtain a free credit report from CBS within 30 calendar days.
More details on the credit report on the Credit Bureau Singapore FAQs.
Is credit score important in Singapore?
Yes! Your credit score will be used by banks to assess how likely you are to repay your debts. So if you are planning to borrow from a bank - like when you take out a home loan for property purchase - you need to ensure that your credit score looks good.
The same goes for applying for an HDB loan. If you're not a full-time employee with regular CPF contributions, HDB will want to take a look at your Credit Bureau Singapore credit report. They'll need to assess how likely you will be able to service your loan before they issue you with the HDB loan eligibility letter (HLE).
Your credit score is also important if you are planning to take up any forms of credit or loans, be it applying for a new credit card, taking up a renovation loan for your new place, or applying for an education loan.
Some employers conduct pre-hire employment checks with CBS, especially those complying to MAS' Fit and Proper Guidelines. Thus, your credit reputation might influence the hirer's decision to employ you.
In Singapore, banks and financial institutions screen their employees diligently and your credit score is one of the many possible employment screening tests they can run prior to hiring you. The risk appetite of the employers depends on the role you are applying for.
Having said that, it does not mean that you can mismanage your credit after landing yourself a job in the Banking and Finance industry. This is because employers can still run annual screening on their existing employees to ensure they are financially sound. This is important especially in times of a recession.
How is my credit score determined? What causes a bad credit score?
CBS calculates your credit score by applying an algorithm to your current available credit data. Your credit score is by no means a static number. It may change from time to time to account for any new credit activity.
These are the key contributing factors that will affect your score negatively. Note that there is no fixed weightage to each factor and how much impact it has on the score.
Immature credit history: You do not have enough credit history to establish a good credit score
Credit exposure: The more you borrow, the higher your credit risk
Delinquency presence: Any criminal or delinquent activity will worsen your credit score
Not enough clean history: Lack of positive loan history (repaying in full and on time)
Adverse credit history: Presence of negative loan history (late or incomplete repayments)
Too many enquiries: The frequency and recency of your loan applications also play a part
To find out which factors apply in your case, you can refer to the key contributing factors section on your credit report to understand what has caused your credit score to drop.
Why do some banks reject while others approve the same applicant with the same credit score?
Your credit score is assessed every time you apply to borrow from any bank or financial institution that is a CBS member.
But different lenders consider different factors and have different risk appetites in assessing an individual's credit worthiness. Therefore, there is no universal standard on acceptable credit score among the lenders.
In addition, each financial institution has its own internal credit score and risk profile for each applicant based on your financial and demographic information.
So, the CBS credit score is only one of multiple pieces of information used in the bank's assessment process, and it is ultimately up to each bank's risk appetite to approve or reject the application.
How to improve my credit score in Singapore, and how long does it take?
If you have over-extended yourself and your credit history has been dented by recent late repayments, you might be wondering when your credit score will look good again.
The good news is that it is within your ability to clean up your credit history! You should:
- Pay your bills on time, all the time
- Keep at least one credit card active
- Avoid applying for too many credit cards or loan facilities within a short period of time
If you do not have an active credit facility, you should apply for a credit card to start building your credit score. Make sure to make prompt payments and you'll be on track to improving your credit score.
There is no fixed period during which your credit score will definitely improve - the score is calculated by a black box algorithm.
But it typically takes a few months of responsible prompt repayments to start seeing an improvement in your credit score.
If applying for new credit facilities has become challenging because of your deteriorated credit score, you might want to try out an unsecured credit card with a low credit limit or take up a secured credit card so that you can start rebuilding your credit reputation.
Is there anything in my credit report that cannot be remedied?
Alas, if your credit history problems go deeper than late repayments - such as default, bankruptcy or debt management programmes - these will also be reflected in your credit report.
Default records will be retained for three years while Bankruptcy records will be retained for five years. This means that even after you are discharged from bankruptcy, you can still face difficulties taking up loans for the next few years.
The credit report should states whether the default is outstanding, whether debt management programs are in progress or whether you have been discharged from bankruptcy as well.
Generally, these are the codes you (or your banker) definitely do not want to see:
W code: This refers to loan default, which is basically the worst code you could see. This does not get reset and will scar your credit score.
R or S codes: This means the bank has closed off your account/credit facility, and you have settled or restructured your outstanding debt.
H code: Involuntary closure of your account with an outstanding balance.