In Singapore, your credit score is one major indicator of your financial situation. If your credit
score is high, it usually means you are in a good position financially. This way, reliable money
lenders have more confidence in your capability to pay back in case you need to borrow
money. Even if you don’t intend to borrow money often, it’s a good idea to keep a healthy credit score.
Here are four ways to achieve this.
Always repay your loans in full every month
This applies to personal loans, business loans, educational loans, and credit card bills. While
many of these offer a minimum payment, it is not wise to repay just the minimum. This will only
lengthen your repayment period, and you will end up paying a lot more interest than
necessary. You may even incur late payment fees later on. In turn, your credit score will suffer.
Instead, pay off the full amount every month. This is the best way to keep a healthy credit
Do not default on any loans
Defaulting on any loan is a huge blow on your credit score. If you cannot repay one loan,
financial institutions will lose confidence in your capability to repay other loans. With that, your
credit score will go down, making it harder to secure other loans later on. Applying for a lease,
a credit card, or financing for big-ticket purchases will also be harder with a low credit score.
But if you repay all of your loans in time, you will maintain a good credit score.
Avoid taking out too many loans at once
If you have multiple loans at any one time, financial institutions will deem you “credit hungry”.
This will also imply that you are in financial trouble, which tells them you are not as capable of
repaying your loans as other borrowers. With these, your credit score will take a hit.
If you really need to take out more than one loan, spread them out over a period of time.
Have only one credit card
Credit cards are actually loan facilities as well, because they let you make purchases without
shelling out any cash. While nothing is wrong with having more than one credit card, it
increases the risk of missing payments. Different banks have varying billing cycles for each
credit card, and it can be hard to keep track of your due dates. If you miss a payment, it will
adversely affect your credit score.
To avoid this, it’s best to have only one credit card. This way, you will also have better control
of your spending habits.
Your credit score is your financial lifeline, so you need to keep it healthy. Repay your loans on
time and in full, and avoid having too many credit facilities open at once to keep your credit
score as high as possible. This way, applying for loans, financing, and credit in the future will
be easier. Most importantly, a good credit score gives you peace of mind.