Achieving your business goals becomes possible when your credit limit can accommodate the necessary sum of money needed. Hence, it pays to understand your personal credit score and how they could affect your business loan.
It is important for financial institutions and lenders to protect their investments to maintain the level of services they do. They need to obtain reliable records of credit histories to guide them in making good decisions beneficial to their objectives. The only way to secure this is to rely on credit scores and be watchful of credit behaviour. Therefore, knowing how to proactively improve your personal credit scores to maintain a good impression with lenders is important.
What Is A Personal Credit Score?
A credit score is an established system that reflects your credit history, which then describes a borrower’s creditworthiness. Simply put, it is a mechanism where the lender protects its investment by predicting how well the borrower can pay back the loan.
The credit score helps the lender decide and approve the credit limit and its interest rates for a particular borrower. That is why maintaining a good credit score is important. Some of the best ways to do this are paying invoices on time and making sure to maintain minimum balances on your credit card. Being mindful of these simple payment routines opens doors to positive approval regarding the request of your personal loans and business financing.
Calculating Your Credit Score
Credit Bureau Singapore (CBS) maintains a consumer credit report of any locally based individual. The numerical score reflected in each enhanced consumer credit report measures the creditworthiness of that individual. The score ranges from 1000 to 2000 and defines the credit risk profile shaped with information provided from various financial institutions. These include traditional banks, credit card companies, and other financial institutions that previously or presently is in a dynamic relationship with you. You can purchase your report from Credit Bureau Singapore.
Poss has simpler borrowing requirements as compared to financial institutions. Complete your Quik application with a few documents including the credit report, identity proof, notice of assessment, and bank statements.
The Five Factors Affecting Your Credit Score
1. Payment History (35%)
Your credit report records how well you pay your bills on time or how many times payments have been missed historically. How far behind you are with your bills payment is a leading indicator of your debt repayment ability and scores will be negatively impacted with any payments past the due date. Therefore, it is advisable that you be prompt with payments to improve and maintain a good credit score.
2. Outstanding Balances (30%)
This sum of money owed is compared against the credit limit made available to you by financial institutions. Circumstances like having maxed out credit cards coupled with high balances will lower your credit score as it could mean poor financial management. Moreover, the higher amount of debt would equate to a higher risk of default. However, prompt repayment of loans and minimum balances will help improve the credit score because of successful payment history.
3. Length Of Credit History (15%)
The period of your credit history with timely payment suggests a good paymaster, especially if it was over a longer duration. It is helpful to consider having your accounts open and active. The idea is that sometimes it may appear to be a wise decision to purposefully carry on an existing low and acceptable balance because it has a good effect on the lenders if they have access to your credit history. A simple habit of forecasting can help you with future financing needs.
4. Types Of Accounts (10%)
The types of credit facilities you have would provide an insight into your spending requirements and existing debt obligations. This includes motor vehicle loans, mortgage loans or revolving credit facilities such as credit cards for your day to day expenses. It is important to opt for the appropriate credit facility for your purchases as different types of accounts function differently.
5. Recent Credit Activity (10%)
Finally, recent credit activity implies the immediate need for financing. Therefore, it is not wise to work out and open multiple accounts at the same time. It suggests that your impulses may bring potential financial trouble in the future. The likelihood of your actions will prompt the credit scoring model to lower the credit scores to protect the financial institution from unnecessary future problems concerning payment of the amount of money borrowed.
Avoiding Future Problems
Before you go about utilising your credit limit, take the time to understand the terms and conditions of each type of account and the fees involved. It is encouraged to be careful and watchful with services received because there might be glitches or flaws along the way. If you realise that there are issues with what was agreed upon as your expectation, have them address it promptly. Maintain a positive interaction with the financial institution. This allows you to be situated on the receiving end of a reliable financial support system. More so if you require business financing in the future.
There is much that we can do when we are financially supported by lenders who trust us. With simple borrowing requirements and transparent fees. You can obtain additional financing from Poss and focus on effectively growing the business without any worries.