Having a good credit score is one of the key factors to obtaining instant cash loans with fast loan approval in Singapore. Your credit score is a prediction of your credit behaviour, such as your tendency to repay your loan on time, based on the details found on your credit reports. Banks and money lenders use credit scores to decide whether or not to approve your loan application and what type of loan is right for you.
Credit scores usually range from 300 to 850. Having a higher credit score often makes it easier for you to qualify for a loan and may lead to better loan terms or lower interest rates. Now, although the exact criteria used for calculating credit scores vary, there are some essential factors affecting your credit score that may be applicable across all scoring models. To understand them, read on as we share the most common factors that impact your credit score.
1. Your payment history
Payment history is the most important component in credit scoring, and even just a single missed payment is enough to have an adverse effect on your credit score. Money lenders want to ensure you repay your debt on time when considering your application for new credit. In Singapore and several other countries, payment history is responsible for about 35% of your FICO Score, which is the credit score utilised by 90% of top money lenders.
2. The amounts you owed
The next most significant component in your credit score is your credit usage, specifically as indicated by your credit utilisation ratio. This ratio is calculated by dividing the overall revolving credit you are using at present by the total amount of your revolving credit limits. Essentially, your credit utilisation ratio determines how much of your available credit is being used and can provide an overview of how dependable you are on non-cash funds. Oftentimes, using over 30% of your available credit is a red flag to creditors.
3. Your credit history length
The length of time you have held credit accounts usually makes up 15% of your credit score. This includes the age of your newest loan or credit account, the age of your oldest loan or credit account, and the average age of all your loans or accounts. Generally, longer credit histories result in higher credit scores.
4. Credit mix
Individuals with top credit scores typically carry a diverse portfolio of loans or credit accounts, which may include a student loan, car loan, mortgage, credit card, or other credit products. Almost all credit scoring models take into consideration the kinds of accounts and how many of each you hold as a demonstration of how well you handle a wide array of credit products. Typically, the credit mix is responsible for about 10% of your credit score.
Overall, several essential factors impact your credit score. And behind the figure itself, there are specific ways you can use to calculate your credit scores. Being aware of your credit score is vital since banks and money lenders use such a score to determine how likely you are to repay your debt on time and whether or not you are reliable enough to obtain a new loan.
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