How to Build Credit Score in Singapore

For most loans above $500 (most banks and financial Institutions don't check your credit grade for loans of $500 or below) banks will use your credit score to determine your loan quantum or how much they are willing to lend you. Unlike some other countries, banks in Singapore seldom vary the interest rate based on your credit grade – if you have bad credit, you will instead be given a smaller loan or outrightly rejected.

This is why it’s important to keep your credit score healthy. The worse it is, the less you can borrow for a car, house, education or starting a business – you get the picture. In some cases, a prospective employer may also ask to see your credit score when you apply for a job. Some employers (particularly in the finance industry) will turn down applicants with bad credit.

But don't worry, building a good credit score isn't as daunting as it seems. Let's explore some proven strategies to boost your creditworthiness and unlock a world of financial opportunities.

Using a credit card responsibly is a powerful way to start building credit in Singapore. When managed effectively, a credit card allows you to make purchases, pay your balance in full each month, and establish a consistent history of on-time payments, which lenders highly value.

However, it's essential to use credit cards cautiously. Overspending or missing payments can lead to debt and damage your credit score. Always strive to keep your credit utilisation low and make at least the minimum payment on time, every time.

For those who are new to credit or have a less-than-ideal credit history, a secured credit card can be a valuable tool. These cards require a cash deposit, which acts as collateral and typically sets your credit limit. This deposit also helps establish a record of responsible repayment. Ensure that the secured credit card you choose reports to the Credit Bureau of Singapore (CBS), as this is crucial for building your credit history within the Singaporean context.

>> Learn more about secured credit cards in SIngapore.

While credit cards are a common tool for building credit, there are alternative methods available.

personal loan, you borrow a fixed amount of money and repay it in monthly instalments over a set period. The lender reports your loan and repayment activity to the Credit Bureau of Singapore (CBS). 

Consistent, on-time repayments demonstrate responsible borrowing behaviour and contribute to a positive credit history. Be sure to choose a licensed moneylender with transparent fees and reasonable interest rates, and only borrow what you need and can comfortably repay.

Back to top

If you're having trouble getting approved for a loan on your own, a co-signer can help. A co-signer is someone with a good credit history who agrees to share responsibility for your loan. With a co-signer, you may increase your chances of loan approval and potentially access lower interest rates or borrow a larger amount. 

However, it's important to remember that the co-signer is legally responsible for repaying the loan if you default, and defaulting will damage both your and the co-signer's credit score. Co-signing is a serious commitment, so have an open and honest conversation with your potential co-signer about the risks involved.

Back to top

A secured loan is a loan that is backed by collateral, such as a savings account or fixed deposit. This makes it less risky for the lender, which can make it easier to get approved, even if you have limited credit history. As you make regular payments on the secured loan, your positive payment activity is reported to the CBS, helping you build credit over time.

Important Note: Secured loans typically have lower interest rates than unsecured loans, but you risk losing your collateral if you default on the loan.

>> Read more: Best Loans for Bad Credit in Singapore

Back to top

Even if you don't have a credit card or loan, you can still demonstrate responsible financial behaviour by consistently paying your recurring bills on time. This includes utilities like electricity and water, telecommunications bills, and subscription services. While these payments may not be directly reported to the CBS in the same way as credit card or loan payments, they still contribute to your overall financial picture. 

Lenders often consider your bill payment history as an indicator of your financial responsibility. A consistent track record of on-time payments can strengthen your creditworthiness and increase your chances of getting approved for credit in the future.

>> Read more: Best Credit Cards for Paying Utility Bills

Back to top

Always repay loans on time

By the time you receive a second or third letter reminding you of late payment, your credit score will have dropped. This will happen whether or not the bank waives lay payment fines.

For credit cards, always repay at least the minimum sum, before the billing cycle ends. At SingSaver, we recommend that credit card bills be repaid in full every month in order to save on interest repayments.

For loans such as mortgages or personal instalment loans, inform your bank early if you think you may miss payments. Alternatively, speak to a credit counsellor. It is possible that the bank will work out a repayment scheme (debt restructuring), which will do less damage to your credit rating.

Avoid multiple loan enquiries in quick succession

If you make four or five loan applications within a short span (e.g. a single month) of time, you could be identified as 'credit hungry'. This is typical behaviour for someone in financial difficulty, such as someone who has just been retrenched or is in debt.

Spread out your loan applications whenever possible. If you're trying to find a cheaper loan, use the comparison tools on SingSaver to compare offers with the lowest interest rate. Don't apply for multiple loans and enquiries all at once.

Limit your number of open credit facilities

In general, avoid having more than four to five credit facilities (personal lines of credit, credit cards, personal loans, and so forth). At any rate, holding six or seven credit cards or credit lines is not advisable. You will likely get confused by the various billing cycles and miss payments.

Always close off credit cards you no longer use, which will also save you paying the annual fee. For personal lines of credit, there is little reason to have more than one. If you find a credit line with a lower interest rate, close your current credit line and switch to the cheaper one.

Never default on loans

If you default on a loan, it will appear on your credit report indefinitely. A single major default can make it impossible ever to get a credit card, line of credit, or home loan. If you cannot make repayment, always seek credit counselling and have your debt restructured. While it will lower your credit grade, it is better than defaulting.

In addition, defaulting will result in legal action if you have the money but refuse to make repayment.

Meet short-term loan repayments to repair damaged credit

If you have a bad credit grade, the easiest way to repair it is by settling in full any short-term or small loans ($1,000 or less). Over time, this will go a long way to repairing your damaged credit once the bureau sees you are making repayments on time and in full.

If you currently have a credit grade of B or under, start doing this a year or two before you apply for major loans, such as a home loan. This could bring you the coveted AA rating by the time you send in your application.

Regularly monitoring your credit scores and reports is vital for tracking your credit-building progress.

In Singapore, your credit report provides a detailed history of your credit usage. It includes information on your payment history, outstanding debts, and credit inquiries. Reviewing your credit report regularly allows you to identify and correct any errors that may be negatively impacting your score.

Your credit score in Singapore is determined by a proprietary algorithm that tracks your use of credit.

Credit Score Risk Grades in Singapore

Source: Credit Bureau Singapore

The highest possible credit score risk grade is AA. Grades of B or C indicate delinquency or late repayments, and grades of D or lower are often caused by defaults (bank was forced to write off the loan).

Non-Scored Risk Grades