Whether it’s for a first house or to pay for college, most of us will require a loan even at the most unexpected times. However, not all loan applications will be approved. If you’ve previously applied for a personal loan in Singapore but were turned down, it could be because of your credit score.
Lenders frequently use your credit score to determine whether or not to provide you with a loan. A negative credit score might make it difficult to secure a personal loan in Singapore, but many people are unaware of this.
Few people understand what causes a low credit score, let alone what to do about it. Some people may not even understand what a credit score is. Don’t be concerned if you’re one of these people. We’ll talk about all you need to know about credit scores and how to secure a personal loan in Singapore, even if you have a bad one in this article.
Learn about the things or factors to be considered before you go ahead and take out a loan by clicking here.
What’s A Credit Score?
A credit score is a number provided to borrowers that indicates their likelihood of repaying their obligations. A credit rating agency offers this that examines borrowers’ creditworthiness independently and objectively. Lenders use credit scores to gauge a credit applicant’s risk, and they’re based on things like loan payment history.
There are two credit rating systems in Singapore:
- Credit Bureau Singapore (CBS)
- Credit ratings from DP
You can request or ask for a copy of your credit report from either the CBS or the Moneylenders Credit Bureau (MLCB). The CBS provides credit reports to banks and finance organizations, whereas the MLCB provides them to licensed moneylenders.
Find out how you can improve your credit score at the Credit Bureau Singapore by clicking here.
Credit Bureau Singapore (CBS) Credit Score
Banks and financial institutions frequently employ the CBS credit score system. When you try to take out a personal loan with a bank in Singapore, the bank will request CBS data.
The CBS credit score generally ranges from 1000 to 2000, with 1000 being the lowest and 2000 the highest. Individuals are assigned a risk grade depending on their score range, which represents their likelihood of defaulting on a loan.
|Probability of Default
|Probability of Default
|1911 – 2000
|1844 – 1910
|1825 – 1843
|1813 – 1824
|1782 – 1812
|1755 – 1781
|1724 – 1754
|1000 – 1723
Credit ratings from DP
It’s simply a financial risk model that determines the likelihood of a company defaulting. A Probability Default (PD) score is awarded to a company based on characteristics including growth and profitability. The PD Score is then matched to a predicted DP credit rating. Only business loans are given a DP credit rating.
Now that we’ve covered the foundations of Singapore’s credit rating systems let’s look at what produces a negative credit score.
What Factors Affect Your Credit Score?
Many individuals don’t realize that there are certain things that can cause your credit score to go down. Some of these things may be beyond your control. If you understand the factors that may affect your credit score, you’ll know what might lead a lender to reject your loan application for a personal loan in Singapore. You can then take steps to improve your situation and avoid those factors as much as possible.
Let’s dive into the four reasons for a poor credit score.
Making Repayments on Time
If you choose not to pay your bills on time, you’ll most likely have a low credit score. Lines of credit frequently require a minimum payment before the end of the billing cycle, the amount of which varies depending on the type of loan. CBS will put you on delinquency status if you are 30 days late on your minimum payment. Paying late fees lowers your credit score as well.
Make on-time loan repayments to boost your credit score. It’s can also be a good idea to call your bank ahead of time to let them know if you suspect you’ll be late with your payments.
Taking Out Several Loans in a Short Amount Of Time
Make sure you don’t apply for too many loans in a short period of time. Your credit score can have complications if you take out too many loans in a short period of time. This is because such behavior indicates to banks that you are having financial troubles. As a result, they’ll be anxious that you won’t be able to pay back the loan.
Make sure you evaluate how much you need before taking out a personal loan in Singapore. One suggestion is to take out one large loan rather than several little ones. This is so you don’t have to take out any further loans. You should also take a break from taking out loans. You’ll be able to prevent unintentionally harming your poor credit score this way.
Using Multiple Credit Card Apps
Applying for too many credit cards in a short period of time is not a good idea. Banks and financial organizations verify your credit score when you apply for a credit card. There will be several inquiries on your credit score if you apply for multiple cards in a short period of time. This can, once again, harm your credit score. The straightforward option is to simply wait.
Applying for credit cards at monthly intervals should be enough. This keeps your credit score from plummeting, improving your chances of getting a personal loan in Singapore approved.
Failure To Repay A Loan
When you can’t pay back your unsecured loan, you’ll be in default, and the lender will write off your debt. Because unsecured loans, such as most personal loans in Singapore, have no collateral tied to them, lenders may choose to wipe off your debt or file for bankruptcy against you.
A loan default will have a significant negative impact on your credit score and will remain on your credit score record for the rest of your life. Lenders will be hesitant to provide you with a loan because they are unsure that you will be able to return it. Remember that a single default can jeopardize your ability to obtain a loan in the future.
Find out why keeping track of your credit score is important by clicking here.
Getting personal loans with bad credit in Singapore
A negative credit score can make getting a personal loan in Singapore difficult. Even if you have a poor credit score, there are still options available to you.
Reorganize Your Debts
Outstanding unsecured debts might cause a poor credit score. First, paying off existing debts will raise your credit score, increasing your chances of obtaining a personal loan in Singapore. That’s why it’s an important factor to create a budget and stick to it.
Call your creditors and let them know if you’re having trouble making your monthly payments. Ask for a reduction for your interest rate or for an extension on your due date. Many financial creditors are willing to work with their customers if they understand that they’re having financial difficulties.
You can also request that banks restructure your debt. This entails talking to your bank about lowering your interest rates or extending your current loan term. A longer payback time reduces the amount you must pay each month, which might be extremely beneficial.
You might be shocked to know that banks are willing to work with you when it comes to debt restructuring. One way to restructure your debt is to enroll in a debt consolidation program. This merges several debt sums into a single, lower-interest loan.
Smaller Loans Should Be Pursued
It may be difficult to obtain a larger personal loan in Singapore with a bad credit score. You should start by applying for modest personal loans. It can be difficult to get a personal loan in Singapore with a bad credit score because you need to prove that you can manage the larger amounts.
The smaller the amount of money, the less important it becomes for banks and other financial institutions to check your credit history. This allows you to get a personal loan approved despite having a poor credit score. Once you’ve demonstrated good behavior when it comes to smaller loans, you’ll be able to move on to bigger ones. A positive track record will make it easier for you to attain larger loans instead of being rejected multiple times.
However, always remember to repay your personal loans on time and in full! This demonstrates that you are capable of repaying your debts, hence raising your credit score. In the future, you’ll have a better chance of obtaining a larger personal loan granted.
Remember that you may need to repeat this process a few times before a lender will consider granting you a larger personal loan in Singapore.
To obtain a personal loan in Singapore, look into options such as licensed money lenders.
You don’t always need to take out a bank loan. Remember that you can get a personal loan in Singapore from alternative lenders such as licensed moneylenders. The good thing about moneylenders is that you can borrow money against your car or property. This allows you to secure a personal loan even with a bad credit score.
Even if you have a negative credit score, licensed money lenders in Singapore are more likely to issue you a personal loan. They also provide quick approval, which can take anything from a day to an hour. This is an advantage for those who need money quickly. Licensed moneylenders also have shorter repayment periods, which can be a great way to reduce your monthly debts.
But before you associate with a moneylender, you will have to make sure that they are licensed. Don’t be tricked by those unlicensed lenders who claim they can give you a personal loan in Singapore quickly and easily. Not all moneylenders are trustworthy. Make sure to avoid scams and find an honest lender instead.
Here’s an informative article on how to avoid illegal lenders.
In short, if you need a loan immediately and have been turned down by banks due to a poor credit score, regulated money lenders are a viable option. It’s worth noting, though, that there are income and age restrictions. Applicants must typically be under 60 years old and have a minimum annual income of S$30,000.
If you require a personal loan in Singapore but have a poor credit history, contacting a certified money lender may be your best option. Allow us to assist you with your personal loan requirements.