A credit score is calculated by putting together a borrower’s credit details such as the types of credit, delinquencies and credit mix. In Singapore, the Credit Bureau of Singapore issues credit scores ranging from 1,000-2,000, in which licensed moneylenders will use to evaluate whether an individual is at high risk of paying back the loan.
Here are a few additional and important factors on how a high credit score is vital in obtaining a personal loan.
1. An indication of your credit health
Your credit health shows your ability to repay the debt or loan that you owe without defaulting. In contrast, a low credit score could raise a red flag to the licensed moneylender, where they might feel that it is risky and unsafe to lend you money, reducing your chance of acquiring the loan.
According to the Credit Bureau of Singapore, the higher your credit score, the less likely you will default on the loan payment. This can reduce the risk of the licensed moneylender from losing money to defaulters. Therefore, if you have a high credit score, the licensed moneylender will most likely grant you the loan.
2. Quick loan approval
The Credit Bureau shows that the grade of the credit score depicts the probability of the individual defaulting on their payments. For instance, AA is the highest credit score, whereas BB and CC grades show delinquency in late repayments. DD or lower grade levels indicate loan defaulting where a bank or licensed moneylender has written off the loan.
Licensed moneylenders are likely to grant your request when your credit score shows that you are highly responsible with credit. Potential licensed moneylenders will also be able to ensure a quick loan approval as your credit score shows that you are trustworthy with your finances.
3. Obtain the best rates
A good credit score ranges from 1,844 to 2,000, in the grades of AA and BB. These scores give you the least probability of defaulting on a payment. They assure the licensed moneylender that you can repay the loan on time and reduce their risk of running losses. This assurance will also encourage the licensed moneylender to offer you an instant cash loan with a much more considerable amount.
With a high credit score, you will also have the option to speak to licensed moneylenders and find the best loan that suits your financial situation. In such cases, you will be able to pick and choose the best loan that is offered with the best interest rates. This way, you may even be able to acquire a loan with a considerable amount compared to what you had in mind.
Your credit score plays an important role when obtaining a loan, such as consolidation loans. Your credit score determines whether licensed moneylenders will grant your loan request, decline, or offer a much smaller loan amount than initially requested.
You should look to maintain a high credit score and pick up good financial habits to increase your chances of acquiring a loan when you need it.