Credit is prevalent in our daily lives now. From credit cards, auto loans to mortgages, credit has long become a part and parcel of our lives. Not only does it bring us convenience, it also helps us achieve our financial goals such as owning that dream house or a fancy car.

However, when it comes to managing of credit, many do not see the importance in it. Ask your peers, have you ever seen your credit report? Do you know your credit score? Many would not have known about their credit report, much less their credit score.

Having a good credit score is an important part of your financial life. It is a major consideration used by banks and lenders for risk assessment and credit approvals.

A credit score indicates how likely an individual can repay his or her debts. A higher credit score relates to a lower credit risk. Hence a good credit score will make it easier for you to obtain credit and qualify for loans.

Here are some simple ways to help you build a good credit score before it impedes your financial life.

Check your credit score

The only way to know if your credit score is good? Check. At present, you can check your credit score by obtaining a credit report from Credit Bureau Singapore (CBS) at $6.42 per copy.

You can also obtain a complimentary credit report if you make a credit application with CBS members.

The credit report shows a record of your credit payment history compiled from banks and major financial institutions along with your credit score.

The CBS credit score is a four digit number ranging from 1000 to 2000 derived from your past payment history on your loan accounts. The higher the score, the lower the probability of defaulting on a repayment within the next 12 months.

Know where your credit rating currently stands so that you can work towards building or improving your credit score effectively if there are shortfalls.

Keep your credit active

To build your credit, the very first step is to start using credit accounts. If you are thinking of leaving your only credit card at zero balance and not use it at all in the hope of scoring that perfect credit score, then we are afraid to say no, it does not work that way.

There needs to be sufficient credit activity in your credit file in order to have a credit score. The objective here is to accumulate a long history of good credit behaviour.

Swipe your card, but in moderation. Pay the bills on time and in the full amount.

Over time, the good payment records will help you build up your credit file and propel you to the good credit score you have been wanting.

Be patient and consistent

Building good credit takes time. There is no quick fix to instantly improve poor credit as credit scores are designed to reflect the quality of your credit activity over time.

If you did leave bad marks on your loan accounts such as missed payments or even a default, making a full payment will not erase the bad marks and change your score overnight.

Instead, clear your debt and continue keeping a good payment record after that. Over time, as credit score is dynamic, it usually gives more weight to recent credit behaviour.

You will find that your credit score will gradually improve and the bad marks would not impede you as much as they age.

Clear your debts

Although using of credit accounts can help you build credit, they can also affect it when you accumulate too much debt. Lenders like to see plenty of breathing room between the amount of debt reflected on your credit cards and your total credit limits.

Hence, the next time you want to take advantage of your credit limit and only make the minimum payment amount for your card, think twice. You will not only incur high-interest charges on the rollover balance, it will also affect your creditworthiness.

Moreover, as the debt continues to snowball, it can reach a point where you find it hard to even make the minimum monthly payment and the amount becomes overdue, or what we would call, delinquent. When delinquency happens, it will have a negative impact on your credit score.

Cut down on the trips to the restaurant or the weekend getaway and save the money to pay off your outstanding balance instead. It will not only save you money on the interests in the long run but also earn you a good credit score.

When you understand how credit works, it is actually not hard to build or improve your credit score that will benefit you in many aspects of your financial life.

If you wish to learn more about the factors that affect your credit score and get a detailed understanding of your credit report, come attend a free talk on 29th June 2017 (Thursday) from 4:00 pm to 5:30 pm!

Screen Shot 2017-06-14 at 9.52.27 AM

For more details, please click on the button below.

I want to know more about credit!