Live & Learn
Getting Your Credit Score Back On Track

Contributed by Credit Bureau (Singapore)

Your credit score is a number used by banks and financial institutions as an indicator of how likely you are to repay your debts, and the probability of you defaulting on your loans. It is an independent assessment of the individual’s risk as a credit applicant.

Having a good credit score should be a priority in managing your personal finance because the higher your score, the better your chances of getting the credit you need.

So, do you know your credit score? More importantly, do you know how to improve your credit score if it’s not measuring up?

How Credit Scores Work

Credit Bureau Singapore (CBS) credit score is based on various types of information in the credit report, which estimates your level of future credit risk. 

Some factors that affect your credit score include:

  • The number of accounts available for credit
  • The credit amount you owe/used
  • Late payments on your loan accounts
  • The number of newly applied credit facilities within a period of time
  • Your credit payments history
  • Lack of credit history

Your credit score is a fluid number that is calculated using an algorithm based on the information in your currently available credit data. It may change from time-to-time in tandem with changes to your credit information.

The score ranges from 1000 to 2000 for risk grades AA to HH. Individuals with a score of 1000 have the highest likelihood of defaulting on a repayment, and those scoring 2000 have the lowest chance of reaching a delinquency status.

The score is not applicable if the risk grade is HX, HZ, GX or CX.

Never-Ending Debt Cycle

Take the example of 35 year-old Sally. She has 3 types of loans to review:

$20,000 credit card balance

$50,000 motor vehicle loan

$350,000 mortgage loan

Her cash flow for the past 12 months is a nett monthly salary of $5,000 and $7,000 in spending. Her $7,000 expense breakdown is as follows:

$2,000 – Restaurant tabs & entertainment bills

$2,000 – Shopping

$3,000 – Travel and hotel stays

Sally knows if she continues with this lavish lifestyle, she will never surmount this never-ending debt cycle. Now, more than ever, Sally is determined to get her credit score back on track.

If you find yourself in a similar debt situation as Sally, it is not too late to take steps to repair your credit and improve your credit score.


Improving Your Credit Score

1. Pay Down Existing Debts

There’s no substitute for paying down existing debts when it comes to repairing your credit. Pay off your outstanding overdue credit card balances first as they weigh heavily on your credit score.

Strategically paying down debt and paying all of your bills on time are 2 of the most powerful tools for improving credit scores. With diligence and consistency, just these 2 simple actions can drastically increase your score over time, and get you back on track to financial success.

2. Stop Missing Payments

Avoid spending more than you can afford and pay off your bills on time, because a missed payment will also cause a drop in your credit score. If remembering payment due dates is a problem, consider automating your payments by setting up a recurring transfer.

3. Monitor Your Credit with My Credit Monitor

What is all that effort if you don’t know your progress? Knowing that your effort is paying off (pun intended) keeps you motivated until you reach your goal.

CBS’ My Credit Monitor (MCM) makes it effortless to monitor your credit report. It looks out for predetermined activities and notifies you as soon as the lender uploads your information into your credit file.

You can choose to be alerted via SMS or email whenever a predetermined activity takes place on your credit file. For example, you will be notified if there’s a deteriorating account status change to any of your credit facilities or when a writ of summon is filed against you.