Award Banner
Award Banner

Denied a personal loan? How to improve your credit score now

Denied a personal loan? How to improve your credit score now
PHOTO: Pexels

The Credit Bureau Singapore (CBS) and the Moneylenders Credit Bureau (MLCB), collects and manages consumer credit data. They give each Singapore consumer a credit score that indicates how likely you are to default on your debts. Your credit score is important and will follow you throughout your life, playing a critical role in a lender's decision when offering or at times denying you credit.

You can find your credit score for free by going to Credit Bureau Singapore and requesting a report of your credit history. The score will range between 1,000 and 2,000 and come with a letter grade (i.e. AA or HH). Those who fall below 1,723 are classified under the lowest grade and are considered a bad credit score.

Credit Score Risk grade Probability of Default
1911-2000 AA Min 0.00 per cent, Max 0.27 per cent
1844-1910 BB Min 0.27 per cent, Max 0.67 per cent
1825-1843 CC Min 0.67 per cent, Max 0.88 per cent
1813-1824 DD Min 0.88 per cent, Max 1.03 per cent
1782-1812 EE Min 1.03 per cent, Max 1.58 per cent
1755-1781 FF Min 1.58 per cent, Max 2.28 per cent
1724-1754 GG Min 2.28 per cent, Max 3.46 per cent
1000-1723 HH Min 3.46 per cent, Max 100.00 per cent

If you have bad credit or are looking to improve your credit score for a future loan, here are five tips you need to know.

1. Build credit history and pay on time

Lenders commonly will decline a credit card or loan application when there is little or no credit history. It is difficult to analyze an applicant when there is no history to review. In contrast, a consumer with a long credit history is generally considered a more reliable borrower (absent significant delinquency data).

If you find yourself in this camp, the first thing you should do is open a line of credit. Many excellent credit card options are available in Singapore to help you build credit. You will quickly see your credit score improve when using your credit card responsibly and paying your bills on time.

2. Avoid defaulting at all costs and pay your debts on time

Delinquency data, or late payment indicators in your credit history will penalize your score. That being said, defaulting on a loan can be one of the most damaging actions to your credit score. The impact of even one default on your credit score can make or break a lender's decision to offer you a credit card, personal loan, or home loan. Not only that, you may be subject to higher interest rates on existing debt as well as any other stipulations in the fine print. So try to make payments on time.


If you are unable to pay off your debt, don't ignore it. Seek out the help of a credit counselor to work with you to avoid making this grave mistake. You may be able to restructure your debt using a debt consolidation plan or balance transfer loan to avoid defaulting on a loan.

3. Try not to have too many or too little open credit facilities

If you have little to no credit history, we suggest you start applying for a credit cards. However, try not to have too many open credit facilities at one time. It is tough to keep track and manage lots of different credit cards in your wallet. So to avoid missing payments and mismanagement of your payment due dates, aim for 4 to 5 credit cards maximum. You should also consider closing out unused credit cards, starting with cards with the highest interest rates and annual fees.

4. Enquiry data

One way your credit score can be penalized is by taking on multiple loans in a short period. This behavior signals lenders that you are desperate for credit and might be in a bad financial situation. Essentially, each time you apply for a new loan, a bank or financial institution requests a copy of your credit report. This creates a new enquiry on your credit history. Having too many enquiries at once, tells lenders that you are trying to take on debt rapidly. This behavior will result in a lower credit score and can even prevent you from being approved for a loan in the future. Instead, spread out your loan applications and wait a few months before applying for additional credit cards or loans.

5. Don't max out on credit cards

Your credit utilisation pattern is essentially a ratio of your total amount owed/total credit available on a recurring basis. Most credit cards have a credit limit, but that does not mean you should regularly max out what you have available. Avoid using more than 30per cent of your available limit to indicate a healthy credit utilisation pattern.

Conversely, if you regularly max your credit limit and run high credit utilisation, you will quickly see your credit score decline. Credit utilisation plays a more significant role than you might have guessed when determining your credit score. If you find yourself with adverse utilisation patterns and your credit score is suffering, adjusting your monthly spending habits can be a quick way to improving your credit score.

This article was first published in ValueChampion.

This website is best viewed using the latest versions of web browsers.