Even if you’ve got a bad credit score, there are still avenues available for personal financing.
The Credit Bureau of Singapore oversees awarding the four-digit score that indicates the likelihood of defaulting on loans. With a score of 2000, you are considered to have a stellar credit score. On the other hand, a score of 1000 is the lowest rating possible, making it hard to secure credit from financial institutions.
When you have a bad credit score, it becomes hard to get cashflow when you need it. But, not to worry, there is always a way out. We’ll look at how you can improve your credit score, and where you can get financing.
What is a bad credit score and what causes it?
A bad credit score ranges from 1000 to around 1700, while a good one starts at 1900 to 2000. The first step in repairing bad credit is to know why your credit rating is poor and how to rectify it. Visit the Credit Bureau of Singapore to get your report, which will cost you S$6.42, inclusive of GST. Below is a summary of the different credit scores and the likelihood of default.
| Score range | Risk grade | Min. probability of default | Max. probability of default |
| 1911-2000 | AA | 0.00% | 0.27% |
| 1844-1910 | BB | 0.27% | 0.67% |
| 1824-1843 | CC | 0.67% | 0.88% |
| 1813-1824 | DD | 0.88% | 1.03% |
| 1782-1812 | EE | 1.03% | 1.58% |
| 1755-1781 | FF | 1.58% | 2.28% |
| 1724-1754 | GG | 2.28% | 3.46% |
| 1000-1723 | HH | 3.46% | 100% |
Here are some of the causes of bad credit.
Lack of credit history
If you have never taken a loan before, it does not mean your credit score is high. There is no information to tell financial institutions whether you are good at repaying or not. When you have a loan or credit card, it gives the banks the following information:
That you are a loyal customer of the bank.
You can make timely repayments in full.
It gives them the impression that you have the skills to manage money.
Late or partial payments
Late or partial payments are an indication that you are not able to meet your financial obligations. Always strive to pay your loans in full and on time.
Defaulting on loans
Defaulting on a loan means you fail to pay the loan, resulting in a loss to the bank. Failing to pay the loan may result in asset freezing, failure to find work in the financial sector, and legal proceedings. It is best to ask the financial institution to restructure the loan instead of defaulting.
Multiple credit facilities
Multiple credit facilities could mean you are overstretching your financial muscle. When you max out on your credit, it gives the impression that you can’t manage your cashflow.
Factors that influence your credit score
The credit report shows a summary of your credit history and repayment patterns. Below are factors that determine the credit score that appears in your credit report:
The number of loans you have taken recently
If you take too many loans, it gives the lender the impression that you are in too much debt and can’t manage your finances.
Your income vs debt
A higher debt ratio in comparison with your income is an indication that you are not able to manage your finances. It means you are living beyond your means.
Account data
The data in your account shows your payment habits. If you make late payments, it shows you don’t have the financial discipline to manage your finances.
Credit enquiries
Too many credit inquiries point to a desperate credit user. It’s a sign that you are not financially savvy.
Available credit
Too many credit accounts show that everything is not in order. Consider debt consolidation to maintain one credit account.
Past transactions
Your spending habits show how responsible you are and your money management skills.
How to improve your credit score
It’s possible to repair bad credit and increase the chances of getting a personal loan. Work on your credit rating to increase your chances of getting a loan when you need it. Below are simple steps you can take to repair your credit score.
Seek credit counselling
Start your debt repair journey by visiting a credit counselling facility. The counselling will help you identify the root cause of your bad credit and arrange meetings with financial institutions to renegotiate terms. Debt counselling in Singapore is offered by non-profit organisations that work with you to repair your credit.
Restructure your debt
Restructure your debt through a debt consolidation plan or a balance transfer. The plans will help you convert high-interest debt to low-interest debt, making it easy to pay.
Debt consolidation involves a provider paying your existing unsecured debts and consolidating them into one single repayment plan. When you have numerous repayments to make, you may forget some, and that will ruin your credit score. Consolidation will make it easier to repay your loans and will assist you in clearing your credit history.
A loan transfer involves getting a new, cheaper loan to clear outstanding debts. The transfer will help you make timely payments and improve your credit score.
Apply for smaller loans
A bad credit score will prevent you from getting huge loans from financial institutions. You can start repairing your credit history by taking smaller loans and paying them off. Keep tabs on the repayment dates using reminders.
Seek loans from non-bank financial institutions
Increase your chances of getting a loan by seeking cash from non-bank financial institutions. Look out for non-bank financial institutions that are registered with the Monetary Authority of Singapore to get the cash you need. Although they will review your creditworthiness often, they have a high-risk appetite and may be willing to offer the loan you need.
Scrutinise money lenders
It’s not advisable to get a loan from money lenders since they charge a high fee. However, there are a few who have reasonable terms. This, however, should be a last resort.
Stick to your repayment schedule
Plan to pay your loan on time and in full. With time, your credit score will improve. Paying the loan on time and in full shows you are responsible for your debt obligations.
Avoid multiple loans within a short time
Multiple loans show that you are credit-hungry, and you don’t know how to manage your cash flow. Organise and prepare budgets to avoid taking on loans now and then.
In addition, avoid sending in too many applications for a loan, as that will give the wrong impression. After an application, take your time before submitting another one.
How to apply for a loan when you have a bad credit history
In this section, we look at steps you can take to ensure you get the cash flow you need despite your bad credit history. Here is what you can do to reduce the chances of getting a rejection.
Find out your current credit rating
Knowing your credit rating beforehand gives you an idea of what you can expect. If your credit score has been rising steadily, it shows you are working to rectify your history. It gives the lender the impression it’s a work in progress, increasing your chance of getting a loan.
Keep your income to debt ratio in check
Before you apply for the loan, make sure you will be able to pay for it. The income to debt ratio shows the amount of income that goes into paying debts. It shows whether you can sustain your debts while living comfortably.
Find out the loan criteria from various banks
Different banks have varying loan provision criteria. Although they have similar terms and conditions, it’s best to research and know what each loan provider requires. In so doing, you will apply for the loan with insight. You will have all the documents ready to avoid the back and forth that could result in a rejection.
It’s also good to check the interest rates various banks offer to avoid surprises later. Look for banks that offer fixed interest rates and see if you qualify.
Apply one after the other
Don’t be tempted to put all the loan applications together at once. Review where you have the best chances and start there. Put in your applications and wait for the review process to be completed before you try another one. A mass application for credit implies that you are hungry for credit.
Can you apply for a loan when you have bad credit in Singapore?
Yes, you can apply for a loan even if you have bad credit. However, you must make a deliberate effort to improve your credit score before the loan application. Start by taking measures that gradually improve your credit score.
Best personal loans for persons with bad credit score
A bad credit score can make it hard to access cash from banks. We look at the best options for you.
Citi Quick Cash
Citibank offers you access to quick cash with a repayment of up to 60 months. Here are the main features of the loan:
- Interest rates begin at 3.45% per annum (EIR 6.5% per annum)
- Loan tenures of up to five years
- Maximum credit limit of up to 90% of your unused credit limit from your Citi Credit Card or Citibank Ready Credit Account
- Minimum loan amount of S$1,000
- Your loan will be approved within one to five business days.
- No processing fees
- Early repayment fee of S$100 or 3% of the outstanding unbilled loan balance, whichever is higher
Standard Chartered CashOne Personal Loan
One of the best options for consolidating debts is the Standard Chartered CashOne Personal Loan. Below are its main benefits:
- Interest rates begin at 3.48% per annum (EIR 6.95% per annum)
- Loan tenures of up to five years
- Loan amount of up to four times monthly salary, with a maximum of $250,000
- S$199 in annual fees
- The minimum loan amount is $1,000
- Instant loan approval
- Early repayment penalty of $150 or 3% of the outstanding unbilled loan balance (whichever is greater)
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HSBC Personal Loan
HSBC offers you a longer loan tenure of up to seven years, giving you more time to pay off the loan. Other benefits of the HSBC loan are as below.
- One of the lowest interest rates at 3.2% p.a. (EIR 6% p.a.) for those earning a minimum of S$30,000 annually
- No processing fees
- Loan tenure of up to seven years
- Minimum loan amount of S$1,000
- Approval time of up to five working days
- Early repayment fee is 2.5% of the outstanding unbilled loan balance
UOB Personal Loan
A UOB personal loan comes in handy if you are pressed for cash. The bank offers instant loan disbursement if all the documents are filed. Here is what you can expect if you opt for UOB personal loans:
- Interest rates start at 3.68% p.a. (from EIR 7.21% p.a.)
- Loan tenures of up to five years
- Access to a maximum credit limit of up to 95% of the credit limit
- Minimum loan amount of S$ 1,000
- Instant approval for applications submitted between 8am and 9pm for new UOB customers
We have the best debt consolidation plans to help you improve your credit rating. Sign up for these personal loans and enjoy low interest rates. What’s more, you can enjoy exclusive offers and welcome gifts.
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