Personal loans can be availed for many reasons and they can affect your credit score both positively and negatively. Only avail for the personal loans if you can repay them in the stipulated amount of time otherwise they can adversely affect your credit score. Before you decide to get a personal loan for yourself it is always better to look for all the available options and compare them. You should choose the best personal loan Singapore for your personal loan needs. To know more about how a personal loan can affect your credit score here are few points that can help you understand it better:
How the credit scores are calculated
Credit scores are the measure of an individual’s probability of loan repayment. The more the credit score the more it is likely that he/she will repay the loan on time. The working of credit scores will only be understood if you know how they are calculated here are some of the points that will help you with the method of calculation of credit scores:
In Singapore, there are mainly 2 organizations that calculate the credit score and provide them to the money lenders and other financial institutions:
- Moneylenders Credit Bureau (MCLB)
- Credit Bureau Singapore (CBS)
It is always a better option to look for your credit scores and make sure that you are eligible for personal loans. The CBS and MCLB help the financial institutions and licensed money lenders respectively by providing your credit scores to them. Your loan approval rate is also dependent on your scores, therefore, it is better to maintain high credit scores for faster loan approval.
How to get your credit scores boosted by availing a personal loan
If you want to avail of more personal loans in the future then you must have a good credit score to start from. This can be possible only if you have never been a loan defaulter and have repaid all your loans on time. If you have missed the deadline even once that is going to leave a bad mark on your credit score and your loan might not be approved as faster as you think. You have to make sure that you abide by the loan agreements to ensure a good credit score and a lesser issue in getting a personal loan. There are many other factors that also affect your score like the credit history if you have a long list of loans that have been paid on time your score is likely to go up.
Factors that affect your credit score the most
The scores are mostly calculated considering the factors such as the:
- Credit mix if the person availing for the loan has availed other credit options and has repaid the money on time. This can also include credit card limits that you have exceeded and this can be a reason for lowering your score.
- The debt amount is the total amount of debt money that is outstanding or yet to be paid.
- Credit history will help you increase or decrease your score according to the amount of money that you have repaid. If you have maintained the payment according to the loan agreement this can positively affect our credit score.
These are some of the factors that lead to the calculation of the credit score which in turn affects the duration of approval of the loan.
The credit score that is required for a personal loan
The most important question of all is how much should be your credit score in order to seek a personal loan? The answer to this question is anywhere above 650 is considered as a creditworthy individual who can avail the loan and will be approved in a short time. The score can be anywhere between 300 and 700 but if you have a larger score you probably have a higher chance of getting your loan approval than the others with a lower score. To maintain the score you will have to repay your loan in the amount of time prescribed to you. The scores are divided into many parts such as good, fair, very good, exceptional, and poor which indicates the loan repaying ability of the individual.
The factors that are mentioned above are taken into consideration when you are applying for the loan and the amount of time required for approval will also depend on that. If you have already applied for a loan and it has been approved then you should try repaying it on time in order to increase your credit score.
Now that you know how the personal loan and credit scores are related to each other you should make sure that you repay your loans on time. Choose from the best personal loan Singapore to avail of your personal loan in a short duration of time. Discover more about personal loan here.