Building A Credit Score Early Is Important, Especially If You’re A Young Working Adult. Here’s Why And How.

A good credit score can help you with your future mortgage loan and maybe even job applications.

Credit cards often have negative associations with bad credit card debts. However, being a young working adult without past credit history or active credit facilities might not necessarily be an advantage. 

Obtaining your first credit card will prove useful in building your credit history and maintaining your financial health as your credit worthiness is assessed based on past and current credit activities. Using your credit card responsibly and paying in full every month will help you to build a strong credit history, which could put you in good stead when applying for essential credit such as a future car loan or home mortgage.

Your credit score can affect your credit and job applications

Having a good credit reputation can affect more than our ability to apply for future car loans and home mortgages — it could also affect your job applications.

Companies are generally more inclined to hire those who come across as responsible, and your credit report is a clear reflection of whether you have been responsible and diligent in your repayment. A low credit score may be correlated with irresponsibility and bad financial management, which may be a red flag to future employers. 

More companies are conducting employment checks on prospective hires to minimise any potential cases of theft and embezzlement. Unfortunately, not many job seekers are aware that a below-average credit score may affect their future job prospects.

How to maintain a good credit score

A bad credit score is usually due to consumers not repaying their debts on time, which results in their credit score dropping significantly. Here are some actions you can take to maintain a good credit score.

Pay your bills on time and in full

Always try to pay in full as any outstanding balances will be charged at 24% per annum basis. You may consider repayment via GIRO to ensure payments are not late. Do take note that default records stay on your credit report for three years even after full settlement while bankruptcy data is retained for five years upon discharge.

Limit the number of credit cards you own

Do cancel unused cards! It is more manageable to keep track of two credit cards than five. Also, do not apply for a few credit facilities in a short span of time — this indicates to creditors that you are desperate for credit and are a risky borrower.

Pay off your debts and consider charging less

Creditors prefer to see more breathing room between the amount of debt reported on your credit cards and your total credit limits. The more debt you pay off — the wider that gap — the better your credit score. Also, try not to be tempted by interest-free instalment plans as they may accumulate to multiple plans!

In a nutshell, having good credit habits and prudent behaviour far outweighs the negative consequences of having to resolve a bad credit rating. Always remember to only spend within your means, track your monthly expenses regularly and apply for loans with the careful consideration that you will be able to repay your debts on time and in full.

It is worthwhile to keep up to date on the details that go into your credit report to monitor your credit health, along with reviewing your report for inaccurate information. You can obtain your personal credit report directly from Credit Bureau Singapore.

This article was originally written by Credit Bureau Singapore.