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young & savvy

Need a major loan? Home in on your credit report first

Make an effort to improve your credit score as banks differ in risk appetites and lending policies

Published on Feb 1, 2015 1:25 AM

By Rachael Boon


I recently signed up for a new credit card.

But instead of just one shiny new card, I received a second credit card - and another credit line to boot.

This took me by surprise and made me curious about my credit score. So I decided to pay $6.42 to view my credit report online - and what I found left me less than fully impressed.

Early last month, the Credit Bureau Singapore (CBS) revamped the report.

It now features your aggregate credit limits and aggregate outstanding balances, including secured and unsecured loans, across financial institutions, while the previous version did not.

It's a relatively quick and painless process to buy the report.

You just need to make sure the pop-up blocker on your browser is turned off for the session, so you can access the link to the report online.

After I received the report, I scanned the 10-page PDF document and soon realised the actual credit report is only two pages long.

The other eight pages tell you how to interpret the credit report, figures and random letters that appear throughout the document.

Since I am used to scrutinising and filtering important information in chunks of text, it was a breeze, but I'm not sure how many consumers have the patience or time for it.

But anyone with a home loan or wanting to apply for one should take the time to study the report, given all the talk about an impending interest rate hike in the United States and how rates in Singapore are to go up as well.

I found that my credit score is between 1,825 and 1,843, earning a CC risk grade, which of course means nothing to me.

The CC grade actually means that the probability of defaulting on my payments is between 0.67 per cent and 0.88 per cent - so tiny.

Should I be pleased about this just because someone with a score of 1,000 has a probability of more than 3.48 per cent of defaulting?

Or should I be alarmed that I have fallen short of top of the class: the AA risk grade, a score of 1,911 to 2,000?

The reasons for my ranking were not spelt out so I could only guess.

Such things should be more explicit. It's made more difficult when "different banks have different risk appetite, hence their lending policies differ", said CBS, on the consumer credit score page on its website.

This was in response to a question from someone with a "relatively high" score, who asked why his application for credit facilities was turned down.

Ms Koh Ching Ching, OCBC's head of group corporate communications, explained: "Different banks apply different methodologies for credit scoring, and they are proprietary information.

"Various factors are taken into consideration when determining a customer's credit score. These factors include the customer's income and credit history."

The report's explanation pages state six different key contributing factors to credit scores.

These include an immature credit history - so mostly young people with little history - which adds to credit risk uncertainty, and credit exposure, where the higher the level, the greater the credit risk.

The two factors mentioned are also among the few associated with the risk grade CC.

But the only suggestion given to improve my score "is to reduce the number of unnecessary new credit applications, as lenders will request a credit report on you and these will reflect in the previous inquiries count".

The report also tells me to pay my credit bills on time and avoid any overdue and default payment behaviour. That "will also have a positive impact to your score".

Ms Koh said that making regular and prompt payments to all existing credit facilities is one good way you can contribute to improving your credit score, as it improves the performance of credit history.

Paying one's credit card bill in full every month helps, rather than just the minimum payment amount.

But banks' lending policies differ, so is it possible that someone with a relatively good score can get rejected for loans?

What if I take out a housing loan, and want to improve my score so I have a better chance? How would all this be held against me?

What else can I do, cancel all my credit cards? More guidance for the borrower would be welcome.

The only certain thing you can do to improve your own score is to pay on time. Which is not a bad policy in any case.

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