4 Easy Tips to Build a Good Credit

Credit is prevalent in our daily life now. From buying of movie tickets with a swift paywave transaction to purchasing of your dream home with a mortgage, credit is used. When speaking of credit facilities, urban dwellers like you and I would find them familiar, holding at least a credit card, car loan or mortgage, just to name a few. Just in the recent year of 2016 alone, over 1.7 million credit applications were made. (CBS Consumer Credit Index)

Having a good credit score is an important part of your financial life. A credit score is a number that indicates the probability of an individual going into a default. It is an independent assessment of the individual’s risk as a credit applicant, and how likely he or she is to repay his debts.

Banks and lenders love consumers with good credit score. If you have a good credit score, it will be easier for you to obtain credit and help you to achieve the many financial milestones in your life, such as owning your dream house or starting your own business.

Here are 4 easy tips that can help you in building a good credit score.

Get your credit report

Know where your credit rating stands now so that you can work towards building a good credit score effectively. There are many factors involved in attributing to a good credit score. By retrieving your credit report, you can get to know your credit score and identify your shortfalls, if any. Monitoring of your credit file also helps protects against possible fraudulent use of your personal details to obtain credit.

At present, you can obtain your credit report from Credit Bureau Singapore(CBS) at $6.42 per copy. If you have made a credit application with CBS members, you can also obtain a complimentary copy of your credit report within 30 calendar days from the date of approval or rejection letter.

CBS credit score ranges from 1000 to 2000, derived from your past payment history on your loan accounts. The higher the score is, the lower the probability of defaulting on a repayment within the next 12 months.

Pay your bills on time and in full

Late or missed payments will certainly lower your credit worthiness. Therefore, be sure to check your bills to see when payments are due. Late fees and interest charges also add up quickly onto your overdue balance, making it harder to repay off the debt.

Aim to make a full payment instead of minimum payment too, especially for your credit card bill. As on top of the high-interest charges, the payment pattern of whether a full payment has been made monthly for your credit card is reflected in your credit report too.

Payment history is an important factor in determining your credit worthiness. Since recent history carries more weight than what happened years ago, getting in the habit of making on-time payments is an incredibly powerful way to improve your credit worthiness.

Keep your credit utilisation ratio low

Lenders like to see plenty of breathing room between the amount of debt reported on your credit cards and your total credit limits. Although the card issuers have extended the credit limits for your use, using up of your credit limits or maxing out your cards may make you look like a risky borrower.

Using less of your available credit is an indication that you are managing credit well by not overspending. The wider the gap, the better your credit worthiness.

Keep your credit utilisation ratio low and spend within your means. If you wish to charge a big ticket item to your card to earn the attractive rewards or cashback, remember to make a full payment before the payment due date.

Avoid multiple credit applications within short period of time

Every time you apply for a new credit facility, the potential lender pulls your credit report in response to your application and places an enquiry on your file. If you have too many new application enquiries in your credit report within a short period of time, it may indicate credit hunger and adversely impact your credit score.

Space out your credit card applications and resist the urge to sign up for too many credit cards at once. If you wish to apply for a loan, carefully work out how much you need and take it up in a single loan instead of making separate small loan applications.

You cannot build a good credit overnight. However, it is actually not that hard to build a good credit score. Just be consistent, and you would soon be on your way to a good credit.

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Credit Bureau (Singapore) (CBS) is Singapore’s most comprehensive consumer credit bureau that has full industry uploads from all retail banks and major financial institutions. Our goal is to help credit providers make better lending decisions quickly and more objectively. To check your credit score today, please visit www.creditbureau.com.sg.

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