Why Is A Credit Report Important And How Can It Impact You?

This is a guest contribution by Credit Bureau Singapore, as part of a partnership between CBS and AMTD PolicyPal Group (PolicyPal and ValueChampion), in line with our mission to empower people with financial knowledge and help them attain financial wellness.

Not many people can afford to pay for big-ticket expenses in cash; most people apply for loans. However, your ability to get a loan can be affected by your credit report, which is derived from your credit history based on data from a range of factors, such as your payment performance on existing loans, outstanding balances and number of loan applications, etc.

Related: Why Is a Healthy Credit Score Important in Singapore and What Are the Benefits?

What Is A Credit Report?

A credit report is basically a record of all your personal credit facilities and total credit limit contributed by Credit Bureau Singapore’s (CBS) members, which include major credit card providers, retail banks and financial institutions in Singapore.

Through this report, lenders can assess how well an individual can repay their debts based on a variety of factors including your credit score, total credit limit granted, number of credit facilities, total outstanding balances. Your credit score is also presented in a credit report that summarises your credit payment history and other data in your credit report.

(At CBS, the credit scores are calculated from an algorithm based on information in an individual’s current available credit data. The score ranges from 1000 to 2000, with 2000 indicating the lowest likelihood of defaulting on a repayment and 1000 indicating the highest probability of default.)

In a nutshell, lenders use your credit report to assess your creditworthiness and determine your future loans repayment behaviour—making this information crucial enough to affect your life (i.e. if you want to take up a loan). This is why maintaining a good credit report is important.

Related: How to Get the Best Credit Score to Apply for Loans in Singapore

How A Good Credit Report May Affect You

The short answer: a good credit report increases your accessibility to obtain loans and credit facilities. Your credit report reflects your ability to fulfil your debt obligations. Credit providers thus use this information to decide whether to approve a loan or extend a new credit facility to you.

Examples of credit facilities available in the market are credit cards, personal loans, housing loans, vehicle loans and renovation loans. Consumers with poor credit score might suggest a higher probability of defaulting on future payments and pose potential risk to future credit lenders.

Conversely, with a good credit score record, applying for loans or credit facilities will be a breeze and help to boost confidence for future credit lenders.

Related: 5 Foolproof Ways to Improve Your Credit Score

How Can I Improve My Credit Score?

Your credit score is fluid and is revised in tandem with changes in your credit information. Having a good credit score is therefore a journey, not a destination. This means you need to take conscientious and continuous effort to improve your credit score, or else your credit score may slip.

Here are a few tips to help you achieve a healthy credit score.

1. Stay Alert On Payment Due Dates

It can be challenging to remember all your payment due dates, especially if you hold several credit facilities. If you’re afraid of missing out on payments, you can set a calendar reminder for all your payment due dates or apply for recurring monthly repayments for all of your credit facilities.

2. Make Full Payments If Possible, Or Pay The Minimum Amount

Missing out on bill payments can have a detrimental effect on your credit score, and your balances will accumulate with the prevailing interest rates and in turn make it more difficult for you to settle the remaining outstanding balances over time.

Therefore, try to make full and prompt payments whenever possible, or at least make the minimum payment before the due date.

Related: Why You Should Avoid the Monthly Minimum Credit Card Payment Trap

3. Avoid Applying For Too Many Credit Facilities

If you apply for too many credit facilities within a short span of time, credit lenders might perceive you as desperate or hungry for cash. Unless necessary, try not to apply for too many credit facilities as it will also have a detrimental effect on your credit score. Keep to a few credit facilities that you will be using regularly and make a continuous effort to pay your bills in full and on time to boost your credit score.

4. Use My Credit Monitor (MCM)

My Credit Monitor (MCM) is a credit monitoring tool that helps you keep an eye on your credit report for your peace of mind. MCM comes with a choice of six or 12 months’ subscription service and complimentary credit reports. Subscribers will be able to receive notification alerts for any predetermined activities on their credit report, providing the earliest possible indicator via SMS or emails.

Related: True Story: How I Raised My Credit Score From DD To AA Grade In 6 Months

Where Can I Get A Copy of My Credit Report?

To check your credit score, you can purchase a copy of your credit report at https://www.creditbureau.com.sg/ or view a sample credit report with a detailed explanation at https://www.creditbureau.com.sg/enhanced-consumer-credit-report.html

Be sure to also follow and like the CBS Facebook page @creditbureausingapore for more useful content and tips to maintain a good credit reputation!

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