Your credit score is a critical metric that shows potential loan providers how well you use your credit. The higher your credit score is, the more trustworthy you look to lenders, and the easier it is for you to get your loan approved.
A low credit score could impose many difficulties when it comes to getting instant cash loans in Singapore. However, there are a few tips you can implement to improve your credit score. It is important to note that it takes patience, effort and time before you see an improvement in your credit score.
If you are looking to get started, here are 5 proven ways to improve your credit score.
1. Check your credit reports
You can’t improve your credit score if you do not know what works in your favour and what doesn’t. Loan providers perform inquiries whenever you apply for a loan, where they will check up on your creditworthiness.
One way to check your credit report is to retrieve a copy online or at Credit Bureau Singapore and review it for any elements that might be hurting your credit score. If you find any errors in your credit report, you should look to fix them.
2. Make timely payments
When loan providers examine your credit report, they will check for trends such as how often and how consistently you make your payments. This is because a good trend of timely payments is a reliable predictor of good future performance in loan repayment.
Thus, you should avoid defaulting on payments as they are detrimental to your creditworthiness.
3. Keep your debt balances low
Your credit utilisation is an essential metric when it comes to determining your overall credit score. It will show your credit usage as a percentage of the total available limit. For instance, if you have a credit limit of $5,000 and you use $500, your credit utilisation will be 10%.
You should strive to keep your credit utilisation below 33% when possible. This is because any percentage above this threshold shows a red flag to the lender. It depicts the borrower as an individual who is trying to push their credit utilisation to the limits.
4. Limit your applications for new credit
Every application for new credit will result in an inquiry on your credit report. Such inquiries can cause your credit score to drop, and it shows lenders that you have a high appetite for credit.
This may give the impression of someone that is reckless in handling their credit, especially if you apply for many new cards in a short span of time. Thus, look to limit your applications, and space them out where possible.
5. Don’t close unused credit cards
Keeping your unused card open is an excellent strategy in keeping your credit utilisation low. If you close your accounts, your credit utilisation ratio might spike, further damaging your credit report and score.
Unless the accounts are costing you extravagant fees, it is an excellent strategy to keep them open as spare cards.
Keeping your credit score high requires good financial habits, patience and effort. By achieving a good credit score, you can also improve your eligibility for consolidation loans in Singapore. Always remember to seek the proven strategies above when it comes to improving your credit score.