6 Tips to Improve Your Credit Score in Singapore

A credit score is a measure of your credit behavior, predicting the likelihood of you paying back loans on time based on information from your credit reports.

In Singapore, credit scores are determined by algorithms that track credit usage. Credit scores are ranked according to the following risk grades: AA is the highest, while BB or CC indicate late repayments or delinquency, and DD or lower indicate defaults. The credit score risk grades are as shown below.

Image Credits: valuechampion.sg

You can easily obtain a credit report from the Credit Bureau of Singapore’s website (CBS) for S$8.00 with prevailing GST. Alternatively, you can get it for free by applying for a new credit card or a loan facility.

Before we dive into ways to improve your credit score and manage your debt, it’s important to understand the significance of having a good credit score. A good credit score in Singapore can provide you with access to larger loans and better interest rates. You see, your credit score is a key factor in determining your loan eligibility for purchases like a flat or a car.

In addition to facilitating loan approvals, a good credit score can also have a significant impact on your career in finance. The Monetary Authority of Singapore (MAS) considers credit checks to be essential for employees and potential hires in financial institutions. Low credit scores can lead to job rejections in the finance industry.

Now, let’s focus on how to improve your credit score. As mentioned above, a good credit score can help you to elevate your career in finance and to boost your eligibility for larger loans. In a place where the cost of living is relatively high, it’s necessary for you to manage your debts and maintain a good credit score to be financially stable. Here are some tips to help you manage your debt and improve your credit score:

#1: MANAGE YOUR DEBT

Be organized. Make a list of all your debts, including your personal loans, credit card balances, and mortgages. Keep track of the interest rates, due dates for each debt, and the minimum payments.

#2: PRIORITIZE HIGH-INTEREST DEBT

Focus on paying off high-interest debt first, such as credit card debt. Prioritizing debt can affect how quickly you can become debt-free. Focusing on high-interest debt will save you more money and allow you to redirect your funds to other financial goals, while following the timeline you set.

#3: AVOID LATE PAYMENTS

Can you imagine how continuously paying for late fees can affect your motivation levels to pay off your debt? By the time you receive your third delinquent payment letter, your credit score would already have dropped, regardless of whether the bank waives your late payment fee. Late payments can hurt your credit score, so ensure that you pay your bills on time.

Set up virtual reminders to help you stay on track. Or ask your financial institution how you can set up automatic payments.

#4: KEEP YOUR CREDIT UTILIZATION LOW

Your credit utilization ratio is the amount of credit you’ve used compared to your credit limit. Maintaining low credit utilization can improve your credit score. If possible, try to use no more than 30% of your available credit.

#5: MONITOR YOUR CREDIT REPORT

Check your credit report regularly to ensure that all the information is accurate. Get your credit report from the Credit Bureau of Singapore. If you find any errors, do not be afraid to raise them.

#6: WORK WITH YOUR BANK

Do not avoid calls or letters from your bank, its debt collectors, and lawyers. Hanging up the call can affect your opportunity to find better ways to pay off your debt. Remain cooperative and reachable. If you are cooperative, your bank is more likely to help you restructure your payment schedule.

Image Credits: unsplash.com

In conclusion, managing your debt and improving your credit score in Singapore requires good financial habits and discipline. By following these six tips, you can upgrade your financial situation and achieve your financial goals in a realistic timeline.

Sources:1,2, & 3

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When to avoid getting a loan

a loan pouch

There are times when it’s best to avoid getting a loan.

For example, if you know you won’t be able to make your monthly payments or you have poor credit, you might want to consider alternatives to getting a loan.

In this article, we will go over the situations when it’s best to avoid getting a loan. Stay on this page.

You are already in debt

You should avoid getting a loan if you’re already in debt. When you’re already in over your head, taking on more debt is only going to make things worse.

You need to get your finances in order so that you can start paying down your current debt. Once you’ve done that, then you can think about taking out a loan.

But don’t forget—loans come with interest rates that can add up over time. Make sure you’re aware of what you’re signing up for before you commit to anything.

You do not understand the terms
terms and conditions page

Image Credits: acquisition-international.com

You probably shouldn’t get a loan if you don’t understand the terms. Yeah, it’s that simple.

When you’re taking out a loan, you’re signing a contract with the lender. And if you don’t completely understand what you’re agreeing to, then you’re putting yourself at risk.

There are a lot of things to consider when you’re borrowing money, like the interest rate, the length of the loan, and the fees. And if you’re not sure what any of that means, then you need to ask for clarification.

It’s also a good idea to get a loan from a reputable lender, someone who has a satisfactory reputation and will be honest with you about your options. So before you sign anything, make sure you do your research and understand what you’re getting into.

You do not need the money that urgently

You might be tempted to get a loan when you’re short on cash, but you should avoid doing that unless you have to. If the truth is, you don’t need the money that urgently.

There are other ways to get out of a financial bind without having to take on more debt. You can sell some of your stuff, or maybe you can run a side hustle to bring in some extra cash.

There are plenty of options available to you, so you should explore all of them before you decide to take on more debt. Debt is a slippery slope, and it can be tough to get out of it once interest rakes up.

Getting a loan to help with a financial emergency is a responsible thing to do, but only if you meet all the requirements. There are a few cases where getting a loan is not the best idea. For instance, if you just left your job or if you have a low credit score, you’re going to have a hard time qualifying for a loan. As mentioned above, you may also want to avoid taking out a loan if you’re already in debt, you do not understand the terms, or you don’t need the money that urgently. If you meet the requirements and can afford the payments, getting a loan makes sense. Just make sure you shop around for the best interest rate and terms.

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When is it a Good Idea to Take a Personal Loan in Singapore?

Are you caught in a sudden financial situation? To alleviate the severity of your problem, you can consider taking a personal loan.

Personal loan allows you to borrow money to pay for personal expenses, which you must repay over time. Things can quickly turn into a nightmare when you do not have the capacity to pay it back. This leads us to these questions: Is a personal loan nonideal? When is bad and when is it helpful?

How It Works

A personal loan is an installment loan that gives a fixed amount of money to the borrower. Its most appealing feature is its ability to provide funds for any purpose. You are not limited by one purpose alone.

When it comes to repayment, you can expect that the interest rate will be fixed. This repayment plan ensures that you get a relatively lower or more affordable interest rate compared to the interest rates offered by credit cards.

When Is It Harmful?

A personal loan can turn into a borrower’s nightmare when the funds are used for the wrong reasons. It is important to think about the consequences of borrowing instead of only focusing on addressing the unpleasant financial situation.

For instance, basic needs are supposed to be covered by your monthly income. You should not use a personal loan to cover your basic needs because these are recurring expenses. Imagine what will happen if you use your personal loan to finance your weekly grocery trips!

When Is It Helpful?

1. When you borrow money for a meaningful purpose such as medical emergencies or major occasions

Despite being a joyous occasion, weddings are expensive. From your wedding dress to your venue, an average wedding in Singapore can cost about S$30,000. With a personal loan, you will get to ease your cashflow by spreading out the payment at a friendlier pace.

2. When you have a strategic plan to pay the loan back

As a borrower, it is your responsibility to plan how you can pay back the amount. If you already know how you are going to spend the money, you should also know how you will be able to repay it. Moreover, it is important to only borrow what you need!

3. When you have the discipline to pay your loan/s on time

Commit to repaying your loan on time. Most personal loans become a burden for the borrowers when they fail to pay their due dates on time. Negligence can lead to penalties, making your personal loan seem unbearable.

4. When you want to consolidate your debts

Do you have multiple loans at high interest rates? If so, it is a practical idea to consolidate these outstanding balances into a personal loan with a lower interest rate. Doing this will enable you to choose your repayment terms and ensure that you can afford the monthly installments.

5. When you want to take the less complicated borrower’s route

Personal loans are less complicated to avail compared to other loans. In fact, many banks and financial institutions in Singapore allow you to apply for it online.

6. When you want to boost your credit score

You can get a small personal loan to improve your poor credit score. Just make it a habit to pay the installments on time and commit to your repayment plan! This works because your payment records will show lenders how trustworthy and reliable you are.

CONCLUSION

Personal loan allows you to borrow money to pay for personal expenses, which you must repay over time. It can either be harmful or helpful, depending on how you use it.

On one hand, personal loans can be used as tools for the right circumstances such as paying for your wedding day. On the other hand, personal loans can be harmful when you do not have a strategic repayment plan or when you use it for the wrong reasons. Weigh your options before committing to a personal loan.

Sources: 1, 2, & 3

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Personal Debt Among Young Singaporeans Soars During Pandemic

Personal debt among young Singaporeans have been rising during the COVID-19 pandemic and the situation could turn sour once the interest rates start to rise.

Recent Credit Bureau Singapore data showed that people in their twenties have been taking on increasing amounts of other debt since the second quarter of 2020. The data manifested that the average personal loans and overdraft balances for those under 30 elevated by about 23% in the first quarter of this year over the last three months of 2020.

To illustrate, the average personal loan and overdraft balances for borrowers aged 21 to 29 increased to S$49,689 in the first quarter of this year. This is about 42% higher than the average of S$34,941 in the first quarter of last year.

It is important to note that the borrowing limits in Singapore were capped in 2015 to help keep unsecured debt in check. Experts say that the higher debts observed recently could have been fueled by the low interest rates among other factors.

RISE OF UNEMPLOYMENT

Last March, the unemployment rate among residents below the age of 30 was 6.4 per cent. Unemployment and lower earnings could be the reasons why young adults take personal loans and overdrafts. They try to borrow their way out of the crisis.

“If it is due to youth unemployment, it is often transitory. And the Government already has the SGUnited Traineeships programme and other relief to help young people and help small firms hire young people.” – Singapore Management University’s Associate Professor of Finance, Mr. Song Changcheng

LACK OF PERMANENT JOB

Ms. Selena Ling, OCBC Bank Chief Economist, said that the impact from rising personal debt among younger people will depend on when things turn around in terms of their professional life.

She added: “If subsequently they can find permanent jobs, then they can pay off the debts. But if the duration is extended, then loan delinquency or default rates may rise.”

MANAGING YOUR DEBTS

Awareness of your overall debts and assets is the first step. Include every document, billing statements, loans, and mortgages you have. Take immediate action when you notice that your debts are getting harder to manage.

After seeing the bigger picture, it is time for you to reduce your expenses. Cut down unnecessary expenses such as designer bags or artisan coffee runs. Add the minimum payments of your debts and the cost of your necessities to your monthly budget. To aid your realistic budget, you may sell your unused or underused items online.

Image credits: unsplash.com

Lastly, you can seek professional help. Start by seeking help from your family and friends. Then, consider hiring a professional to reduce your interest rates and penalties at forgiving timeframe.

Source: 1

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Beginner’s Guide To Credit Cards

DEFINITION

Swiping a credit card is the polar opposite of using a debit card. The latter allows you to spend the money that you already have in your checking account. While, the former lets you borrow money from a financial provider. You have to pay an interest at the end of every billing statement.

Be forewarned that having a credit card does not equate to having “free” cash around. It only means that you are expected to pay back whatever you borrowed at a given period of time. Furthermore, you are held responsible to check whether you are spending within the maximum limit.

MECHANISM

How do credit cards work? As a responsible owner of a credit card, you must know the mechanism behind owning one.

Firstly, you must apply for a credit card. Research on which type of card suits your needs the best. Choose a card based on your eligibility, your credit score, your annual income, and your lifestyle. One credit card may have an annual fee, while the other may have a discounted fee for the first year.

Secondly, you must wait for the financial provider’s approval. Major credit card companies often use online services for their card applications. Thus, you will he able to review your application results immediately. Once approved, your financial provider will send you a physical card.

Thirdly, you must make purchases with your card. To spend online, simply enter your credit card number and other additional information (e.g., CVC at the back of the card). Your balance will add up as you spend. Remember to keep an eye on your credit card limit.

The last step is for you to review your billing statement and pay promptly as you have agreed.

SUGGESTION

For beginners, some of the best credit cards this year are as follows. You can count on the American Express Platinum Credit Card for rewards, OCBC 365 Card for dining benefits, and Citi VISA PremierMiles Credit Card for travel miles.

A. American Express Platinum Credit Card lets you reap these benefits:

* Receive 1 Night Stay at Swissôtel The Stamford Singapore worth S$529 upon Annual Fee payment.
* Receive an additional Samsonite Sigma 76cm Expandable Spinner worth S$600 when you spend S$4,500 within the first 3 months of Card Approval.
* Receive S$20 CapitaVouchers each, for the first two approved Supplementary Cards.
* Enjoy Love Dining @ Restaurants privileges which offers up to 50% savings on food orders at a handpicked selection of popular restaurants.
* Love Dining @ Hotels offers you exceptional year-round privileges and savings of up to 50% on food bills for unlimited visits at selected 5 star hotels around Singapore.
* Enjoy a complimentary drink with purchase of at least one item from the merchant’s menu at over a dozen fashionable bars in Singapore.

To qualify, you must have a minimum income requirement of S$50,000 per annum for Singapore Citizens and Residents and S$60,000 per annum for Expatriates. Terms and conditions apply.

B. Citi VISA PremierMiles Credit Card lets you collect travel miles, which you can use in renowned airlines’ frequent flyer and hotel loyalty programs. These include Krisflyer, Asia Miles, and Qantas. You will be rewarded fast as you spend with your card. Terms and conditions apply.

C. OCBC 365 Card is best used for dining. It has a cashback promo that allows you to reap rewards whether you dine internationally or locally. Here is a layout of the rewards:

* 0.3% cashback on ALL spending
* 3% cashback on TELCO bills, local supermarkets, and online purchases
* 3% to 6% cashback when you dine in restaurants island-wide
* 5% cashback on petrol purchases
* Up to 18.3% discounts at petrol stations
* 3% cashback on medical spending – under Child Development Account
* Complimentary travel insurance (up to SGD $800 coverage)
Terms and conditions apply.

Image Credits: pixabay.com

Be wise when choosing your first plastic card! 🙂

Sources: 1 & 2

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