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What Makes a Good Credit Score?

on May 10, 2021

What is a credit score and is it that important in Singapore? How does one go about maintaining or improving it?


Understanding credit scores and knowing your credit behavior is key to being financially healthy. In developed countries like Singapore with a solid financial system in place, a good credit score can go a long way in helping individuals secure loans at good rates. In this article, we will share some insights on what makes a good credit score and how personal loans can help you improve it.

How important is having a good credit score in Singapore?

Did you know that your credit payment history is recorded and can affect your ability to take out loans? The Credit Bureau Singapore (CBS) collects and aggregates information on borrowers’ credit risk to financial institutions. Each time you apply for a loan, the financial institution will refer to your credit report to determine how big or small a loan you can apply for, and the rates at which they will lend to you.


There will come a point in many Singaporeans’ lives where taking out a loan is an absolute necessity. Some common examples include a housing loan, car loan, business loan, and education loan.


Having a good credit score makes it easier for individuals to qualify for loans, especially when a large sum of cash is required on a rainy day. However, people struggling with a low credit score, often find themselves deprived of good financial options in times of need.

Some factors that can affect your credit score

  • Amount of credit and debt

    The more debts and credits you have, the lower your credit score. If you have been taking out multiple loans in quick succession, it may be a sign that you are over-extending yourself and will affect how financial institutions view you as a borrower. Each time you apply for a new loan or credit card, the financial institution will inquire into your credit score with CBS. Your credit score may be impacted negatively if you have made many of such applications within a short period, as it may be a sign that you are taking on more debt, thus lowering your credit score.

  • Defaulting on loans

    All it takes is one late payment or defaulting on a loan to negatively affect your credit score. It will taint your credit report indefinitely. If you consistently make late payments or default your loans, you will be penalised and this can result in you no longer being able to apply for loans in the future.

  • Lack of credit history

    Some people may prefer not to have credit cards to keep their credit history clean and avoid incurring debt. However, in some cases, a lack of credit history would make it difficult for financial institutions to effectively determine your creditworthiness and repayment ability. It is advisable to have at least 1 credit card with payments made promptly and in full to increase your credit rating, making you a good candidate for any loan application.

How personal loans can help improve your credit score

  • Debt consolidation

    If you are struggling with a low credit score due to multiple loans, using personal loans to consolidate your debts into a single, fixed monthly repayment can be useful. It can help you save more in cash over time as the interest rates are generally lower.

  • Repaying loans on time

    With a single consolidated loan, you would be able to focus on repaying your monthly loans on time. In the long run, with timely payments, your credit score will improve and will help you gain access to better loans in the future should the need arise.

  • Flexible repayment terms

    Most moneylenders and financial institutions offer a flexible repayment term of up to 12 months. While this is subject to approval and largely depends on the borrower’s ability to repay the loan, it is a good option that allows you to stretch your loan over some time with a fixed interest rate.