How to Build Up Your Credit Score and Rating in Singapore (2020 Update)

The importance of credit in the business world cannot be overstated. It is related to how much money you are able to borrow and also to the ability to purchase what you need. It is actually a key factor in just how fast you can grow your business. This blog looks at what credit is, why it is needed and how to get it.

Credit: What Is It And How It Works Exactly?

Credit is money that you borrow in order to purchase services and goods whenever you need them. The credit is extended to you by a credit grantor with the agreement that you will pay back the principle as well as applicable financial charges within a certain time period. Credit comes in a variety of forms: credit cards, banks and other lenders, payment agreements with your service providers and vendors among others.

The amount of credit extended to you is largely dependent on your credit score.  This allows them to judge whether or not you can be trusted with money, and if you are a lending risk. It is important that you build credit. This simply means to establish your credit rating so that it becomes cheaper and easier for you to get credit. As your credit rating improves, so does your borrowing capacity, and your cost of borrowing reduces.

Your Credit Score: Bureaus, Reports, and much more in 2020

Your credit score comes from your credit report. This report has information about how much income you make, the length of time you have been at your current residence, how long you have held your job, the amount of money in your bank account, and your past credit dealings. Credit bureaus compile these reports with information that has been gathered from providers and other sources, and use their own formulas to come up with a score.

Since your credit report has a lot of information that lenders may not have the time to review, this information is summarized into what is commonly known as the credit score. Based on how you score, lenders are able to figure out the type of loan that best suits you and how much money they can lend you.

Why Is Credit Important?

Unless you have a lot of money stashed away somewhere, chances are that when you need to make a major purchase, you will need to borrow some money. When it comes to business, this could be equipment, inventory, a building or just capital to get started. Without credit, doing these things may become more difficult. Financial institutions like SingBusinessLoan.com, traditional banks, credit unions and others need to look at your credit history in order to know if they can trust you to repay the loan.

How Do I Build Good Credit?

If you are looking to build your credit score and rating, it is important that you borrow money and repay.  Here are ways that you can begin building good credit:

You need to show that you meet your financial obligations: This is not difficult to establish since all you need to do is make sure that you have a series of receipts of utility or rent payments. You can pay by check so there is a record and ensure where possible, that the utility and apartment accounts are in your name.

Use a credit card: The idea here is to establish a pattern that shows responsibility. Use the credit card and make sure that you make timely payments. If you are a student looking to establish credit, it is a good idea to get a credit card that has a low spending limit. Parents are able to co-sign for students who may not qualify for the credit card on their own.

Pay off current debt: If you have a current loan, such as a student loan, paying it off is one of the best ways to establish your credit.

Open savings and checking accounts: This is important because lenders consider this a sign that you are financially stable.

How Can I Raise My Credit Score?

There are several things you can do as follows:

1. Be sure to make timely payments for credit cards because even falling behind a few days can negatively impact your score.
2. Ensure your debt remains low. It is important that you don’t go over the credit limit you have been given. It is best to stay under 50% of the credit limit and your score looks better if that percentage is even lower.
3. When paying off debt, be sure to pay off the minimum amount at the least. If you can pay even more, the better. Be sure not to skip payments and not to overextend yourself.
4. Even if you are not using the credit card, keep it open. Credit is calculated based in part on how much is available for you to borrow versus how much you have borrowed.
5. Ensure that you don’t have too many recently opened credit accounts.
6. Ensure that you are not using too many different credit accounts.
7. Protect yourself from identity theft.
8. Review your credit report yearly and ensure that the information in there is correct.