Good credit report is important to secure the best home loans in 2022

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For those searching for a new home and for property investors, a good credit report will determine if you get the best home loans

good credit report
Image: Alpha Stock Images

Your credit report is a record of your credit payment history compiled from different credit providers. As most lenders will check your credit file to assess your credit worthiness prior to making a decision, a good credit repayment history will make it easier for you to obtain credit and to qualify for loans.

By reviewing your credit report regularly, it allows you to be aware of any information that is uploaded on your credit file. The other advantage of monitoring your credit file is that it protects against possible fraudulent use of your personal details to obtain credit.

A good credit report also helps credit providers to make faster and more objective lending decisions.

By providing credit data to its members (credit providers) under authorised conditions, the Credit Bureau of Singapore (CBS) helps them to determine whether or not the person applying for credit is a good credit risk. In doing this, lenders can make better lending decisions quickly and objectively. This will also contribute to a more competitive credit marketplace among the credit providers. With CBS in place, responsible customers can expect faster and more competitive services from the credit providers.

CBS typically uses a credit Score to evaluate your credit-worthiness in their credit report.

A credit Score is a number used by lenders as an indicator of how likely an individual is to repay his debts and the probability of going into default. It is an independent assessment of the individual’s risk as a credit applicant.

CBS’s Credit Score and Good Credit Report:
  • A CBS Credit Score is a four-digit number based on your past payment history on your loan accounts.
  • The score range from 1000 to 2000, where individuals scoring 1000 have the highest likelihood of defaulting on a payment, whereas those scoring 2000 have the lowest chance of reaching a delinquency status. Together with the score, the risk grade and risk grade description are provided.
  • Your credit score is just one factor used in the application process. Other factors apart from your credit report, such as your annual salary, length of employment, bankruptcy/litigation information, number of credit facilities may also be taken into consideration by lenders during a loan application.
  • CBS neither “blacklist” nor play a part in the lending approval decision which is fully undertaken by lenders and its lending policies. CBS instead, only provides specific factual credit-related information about consumers who have credit or loan facilities to the lenders.

Description of Credit Score

good credit report

Factors that Affect Your Credit Score?

1. Utilization Pattern

  • This refers to the amount of credit amount owed/used on accounts by individuals.

2. Recent Credit

  • Lenders may perceive that you are over-extending yourself if you have newly booked credit facilities within a short period of time.
  • Consumers are advised to apply for new credit in moderation.

3. Account Delinquency Data

  • Presence of delinquency (late payment) on your loan accounts will reduce your credit score.

4. Credit Account History

  • A consumer with long established credit history is deemed to be more favorable or a reliable borrower when compared to one who has limited or no credit history.
  • Accounts with history of prompt payments will help to boost your credit rating.
  • 12 months of account repayment conduct (closed and defaulted accounts are also included) as displayed under the Account Status History in your credit report is used for score calculation.

5. Available Credit

  • This refers to the number of accounts available (open or active) for credit.

6. Enquiry Activity

  • This refers to the number of new application enquiries found in your credit
  • Each time a potential bank/financial institution pulls your credit report in response to a new loan application, an enquiry is placed on your file. Having too many enquiries in your credit report indicate to lenders that you are trying to take on more debt, therefore increasing your credit exposure.
  • To keep your enquiries to a minimum, try to limit the number of loan facilities and credit cards which you apply for.
  • Review enquiries on existing loan facilities do not affect your score.

A credit report is especially important for homebuyers and those that want to invest in real estate. Finding home loans in Singapore, let alone finding one with a reasonable interest rate can be a challenge if you have defaulted on any loan repayments before.

People who want to buy a house now should get their Credit Report checked.

If you have defaulted on home loans in Singapore in the past, this can make it extremely hard for you to find a lender with a reasonable interest rate.  Why only Home Loans in Singapore? This is because CBS will not be able to check your credit status or record in another country.

As said earlier, a credit score is a number that the lenders consider before they determine if they should approve your application for loans in Singapore. It is a joint effort between all the major lenders here, where data about consumers’ credit history is pooled together and aggregated. Within the aggregated data, lenders would have access to records that show the number of accounts that you have across different banks, and your payment history.

After crunching the available data, each account holder is then assigned a credit score. This indicates how good or bad of a risk you might be to the lender as a customer. The higher the number (up to 2,000 and AA rating), the better your credit score.

Although the the exact weightage of how your credit score for the credit report is calculated isn’t public knowledge, the factors that the CBS uses in determining your credit score is.

Factors like usage patterns of loan facility (e.g. if you have been making large purchases or transactions lately); your recent credit account activity (The number of credit facilities an account holder has is considered by banks as liabilities as they may perceive that you are over-extending yourself); and your account delinquency data, or how you have fared as a customer (this means where possible, always avoid making late or partial payments for your facilities).

Other factors considered by CBS include your credit account history, or how long you have been a customer (factors like if you have you been a loyal customer of your bank since you received your first credit card from them); how much available credit do you have (your credit score is affected by the number of accounts you have with various banks in Singapore); and enquiry activity of how many organisations have asked about you (having too many enquiries might indicate to banks that you could be taking on more debt than you should).

Written by Ravi Chandran

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