If you have noticed that your credit score has recently dropped. You could start by finding out the cause of the drop. Maybe you noticed that your credit report shows a point reduction within the last 6 months. It could that you have recently requested for a personal loan. Then you have got an estimate which is of a lower amount than expected. Recognize that your credit score might be the primary reasons for the decreased funding. It might be the reason for the higher interest rates charged.
Always check your account’s report for any errors. Also, examine it for any emerging credit use patterns. It could be that you have made one of the below-mentioned 4 mistakes.
Credit Rating versus Credit Score
It is important for you to be able to tell the two apart. There is a difference between rating and the credit report.
It is possible your determine your rating by looking at the credit records. Your rating can be worked out by loan officers from banks. Moneylender loan officers may also do so. Using this information, the officer then decides on your creditworthiness.
For them to be able to determine this, the loan officers will also consider other factors. Some of the things they consider are the repayment history, job stability. In addition to other factors that are considered.
It is computed using all your past credit records. Some of the things looked at including your past loan requests. This will also indicate the history of all the loan repayments. At the same time, it clearly shows whether you diligently were able to pay off the loans.
The credit score is got from your previous credit reports. Thus, when the risk grade you have is BB or CC. This is interpreted that as a borrower you normally are late in settling your personal loans. Getting the DD score and below shows that you may have defaulted. Meaning that you have failed to repay your existing debts.
Recognize that if your credit score is low. Accredited moneylenders, as well as other lending establishments, are less inclined to approve the application.
4 Mistakes That Will Lower Your Credit Score
#1 Focusing On Some Payments Alone
Possibly you have accrued a large amount of debt. At this point, you would like to pay it off within the shortest time possible. Even then there are several options available for you to repay the debt. This is starting with first tackling the smaller debts to dealing with the largest personal loans head on.
It can happen that along the way you might overlook or forget payment on a few credit cards. This might easily contribute to a drop in your score. Regardless of the debt settlement system you choose. Always ensure that the minimum amount due on each of your credit sources is paid.
#2 Missed Or Late Payments
Assuming that you have changed your home address. However, you have failed to inform your legal moneylender to update the records. Then it is probable that you will not receive a specific bill punctually or even not at all. This means that you will end up missing your credit card or even a utility bill. This could also mean that these bills will get paid after the set due date.
You certainly have good intentions. However, at times the pressure of daily life gets the best of you. Or it could be that you have received your bill alert via email or phone. But then you have forgotten to settle it.
Even then, it is important that you realize the effect of these two situations. Both the late and missed payments will negatively impact your credit score. Therefore, it is advisable to keep your records up-to-date. Above do not postpone your essential credit repayments.
#3 Family Cards Or Loan Guarantees
Generally, many Singaporeans have a helpful nature. This is especially true as far as your friends and relatives are concerned. When a friend or relative is in any trouble. You will want to assist them in any way you can. In this instance, it could be from acting as their guarantor for personal loans. Or it could be getting them supplementary credit cards.
#4 Maxing Out Your Credit Card Limit
If you have maxed out one or more of your credit cards with cash advances and purchases. You without knowing are sending the wrong impression to future moneylenders. When they look at your records and notice this trend. To them, this is some signs that as borrower, you have lots of debt at hand. Making them doubt your ability to effectively manage your credit.
In 2014, Singaporeans had around 9.7 million credit cards. This is both the main as well as supplementary cards. At the same time, these numbers have since kept growing. It is possible that you possess more than one credit card. Therefore, it is a good idea to spread your lending across them all. This rather than using only one for your borrowing.
Another thing for borrowers to keep in mind is avoiding taking out large loan amounts. This is especially when it is done within a short time. In so doing, it often shows potential moneylenders that you have some financial troubles. This is despite the fact that you have the capability to pay punctually.
It is important for borrowers to realize this. Having additional debt will not impact your credit score as much. However, skipping payments and delinquency behaviour on a borrower. This will not only force you to settle the bill, however, it will hurt your score rather badly. Also, you need to be careful anytime you co-sign a loan for others. The better alternative, in this case, could be for you to loan them an amount of money. This amount needs to be something that they are able to repay you and on preset terms.
All the small things could accrue over some time, when not attended. In the end, they can hit your rating hard and when you least expect it.