How To Improve Your Credit Score For Mortgage Loan

Updated: Apr 22



Credit bureau report is one of those small things that most people do not pay much attention to but is absolutely critical when you require a mortgage loan. A poor credit score is one of the reasons why loan application is stalled.




It is a waste if you have to miss a fire sale opportunity just because your mortgage loan application is declined due to poor personal credit rating and low credit score.


Be mindful about your credit records and audit your credit bureau report every now and then to position yourself with the best borrowing capacity when the time calls for it.



So, What Exactly Is A Credit Score?


Few things have a larger impact on your adult life than your credit score. A credit score is a number assigned to you as a measure of how likely you are to repay your debts and the possibility of you defaulting on payments, and plays a pivotal role in many financial decisions in your life when you require a loan.


Your credit score is also one of the factors that will determine if your loan applications are successful and consequently affect the loaned amount and interest rates. Paying scrupulous attention to your credit score is thus crucial. The score is compiled using data pooled from all financial institutions.



The score ranges from 1000 to 2000 with a higher score Indicating higher credibility and lower risk of defaulting. It is usually only obtainable via a credit report from the Credit Bureau of Singapore ( CBS ).

Your credit report also contains your financial history and your risk grade, which is the credit bureau’s index on the possibility of defaulting. The range of possibilities are denoted by numbers, from AA to HH, with AA being the best credit score, and HH indicating a high possibility of defaulting on loan payments.


Credit Bureau Singapore does not influence on any decisions whether you get a loan or not, they will just impartially provide the information that the participating financial institutions contribute on their borrower’s records.


Apart from your credit score, other factors such as your income, number of credit facilities you use and how long have you been employed or unemployed, etc


As many different factors go into maintaining a high credit score. If you are just beginning to figure out how to Improve yours , here are some tips that might come in handy.



7 Ways To Improve Your Credit Score


1.  Always pay your bills on time


How much you utilize your credit cards, and how promptly you pay off your dues every month affects your credit score. On time payment of your debts is a great way to improve your credit score. If you are unable to pay it off all at once, then make sure you pay at least pay the minimum amount billed to you on or before the due date.




2. Repay Outstanding Debts


Payment history impacts your credit score significantly, and the fastest and most efficient way

to repair your score is to settle outstanding short-term and small loans wherever possible . Avoid getting charge-offs which occur when payment is 180 days past due . Charge-offs will reduce your credit score. Incurring a charge off also does not mean that the owed balance is written off. You are still liable to repay the amount. Furthermore, the charge-off status will continue to be reflected In your credit report for the next seven years even after repayment. The

good news is that the impact of charge-offs on your credit score will decrease with time.





3. Check your credit bureau report regularly and report any discrepancies


Sometimes, there may be errors on your credit report. If you discover any information in your credit report that is inaccurate or incomplete, you may dispute the errors with the credit bureau via online channels he phone, or mail. Include a copy of your credit report and supporting evidence that supports your claim. The credit bureau will launch an investigation. If your claim is legitimate, the credit bureau will remove the error on your report.



4. Avoid multiple loans within a short period of time


Avoid multiple loan enquiries in quick succession as this could lead to you being labelled as "credit hungry", a behaviour associated with individuals in financial difficulties. In such an instance, banks are less likely to extend new lines of credits, given the inherent risk of defaulting. Space out big purchases, as sudden changes in spending habits may also spook lenders.



5. Commit to a plan to keep a good credit score


Do not get carried away with unnecessary spending. Space out big purchases, as sudden changes in spending habits may also spook lenders. Set a budget and a budget review it. Make it a habit to check your bills on time. A good way is to arrange auto-credit your monthly payments through Giro so you will not miss out on any due dates.





6. Make sure your credit is always active


Your credit cannot be evaluated if you don’t utilised it. No credit assessment implies no credit score, and no credit score implies that banks can’t ascertain your payment conduct when assessing your loan application. Since they cannot evaluate how well you manage your finances, granting you a loan will be difficult.


In the event you are a first-time borrower and have no current credit records, your credit bureau report will reflect credit rating of CX, which implies there is insufficient information to determine a credit score.



Many will think that good quality borrowers are those who do not owe banks any debts and hence will have no issue securing a loan . On the contrary, most banks will be reluctant to extend financing to first-time borrowers with no credit profile as they can’t determine whether they are good paymasters.



6. Try to limit the number of cards and credit limit you have


If you are drawing a high income from your business, your credit cards credit limits will be high as well because most banks will grant 2 times to 4 times of your monthly income for your credit limit. If you do not foresee using such a high credit limit consistently, request your banks to lower the credit limit of your credit cards. Also, cancel credit cards that you do not need.


Having a high total aggregated total credit limit from all your personal unsecured credit facilities, will impact your credit score even if you don’t draw down on the limits. This is because you are considered a high credit risk as you can draw down at any time a large unsecured credit limit.




Remember:


Your past 12 months of account repayment history is recorded and used for calculating your credit score. This includes accounts closed and defaulted accounts, so building a habit of good credit management is key.


It can take several months to see a noticeable improvement on your score once you start working towards to turn it around. However, the sooner you start working on it, the sooner you will see your credit score improve. Jia you!



About The Author


My passion is to serve my clients in building their wealth through property investments.


With prudent planning, creative tax and financing strategies, it is possible to start your investment journey earlier in life and make time work in your favour for maximum wealth growth.


I will be glad to have a chat with you to learn more about your goals and current situation and provide you a step by step road map towards property wealth planning.


Jacq Ng 97642556

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