An individual’s credit report contains a record of his/her history of repayment behavior towards credit facilities.
It records recent payment history of almost all types of facilities including:
- Car loans
- Home loans
- Student loans
- Personal loans
- Credit cards
Lenders use the credit report of an applicant to determine a credit score so as to judge how good of a paymaster the potential borrower is.
Credit records for the most recent 6 months to 12 months are often the most relevant to credit scoring conducted by lenders.
With the exception of unique events like bankruptcy that can stay relevant for years.
Should the credit score be interpreted as undesirable by a lender, they often decline the application outright.
Since credit scoring is often the fist phase of loan assessment, a lot of credit applications never even reach the desk of an analyst as they get thrown out due to bad credit.
To build up a satisfactory or good credit record, people should make timely payments towards their debt obligations.
Anyone can make a request for their own credit report by placing an order with the Credit Bureau of Singapore (CBS).
What information is contained in a credit report
A typical credit report contains a wealth of information about the individual in question.
It would consist of personal information like:
- Legal name
- NRIC/Passport number
- Date of birth
- Residential address with postal code
This is to ascertain that the individual the report is on is indeed the person in question.
It would also contain a summary of the report which would list down important details like:
- Date of earliest known credit facility
- Number of previous enquiries for the report
- Number of defaults
- Number of bankruptcy proceedings
- Different categories of credit limits
The most interesting part of the credit record would be the list of the types of credit facilities and loans a person has under his or her name, and the repayment record for the particular items.
This section of the report would contain meticulous details of each credit facility or loan, indicating:
- Type of product
- Issuing lender/bank/financial institution
- Type of account
- Opening and closing date
- Balance that is overdue (if any)
- Repayment status for 12 most recent payment cycles
The section indicating the recent repayment record would contain characters like A, B, C, D, etc.
For product accounts that are still live and open, the best record would be a whole line consisting of As.
This indicates that the borrower has been making timely repayments towards his to her debt obligations.
Loan applicants would usually find the highest credit scores when they have accounts that consists of all As.
This is because such a repayment pattern shows that a borrower currently has credit facilities or loans, and has been a model paymaster by making timely prompt repayments on a regular basis.
If a person has no accounts like credit cards, then it would be difficult to assign a score to the person as there is simply no credit history indicating repayment behaviour.
This also implies that if someone intends to build a strong credit score, he or she needs to have at least 1 credit card or loan on record with good repayment history on record.
Recent repayment status that shows B, C, and D for example, represents account that went into delinquency.
More details of how to read your credit report can be found here.
Working with credit reports
It must be noted that the credit report of any individual only consist of data. They don’t make any approval or rejection decisions for banks.
It is up to a lender to use the data generated and interpret the creditworthiness of a prospective borrower based on their own internal credit assessment policies.
While it is simply impossible to say whether a borrower can pass a credit scoring conducted by lenders, or fail one, it is safe to speculate what a good credit report would look like with a high degree of certainty.
A credit report that would almost certain pass a credit scoring test would have:
More than 3 accounts of loans or credit cards currently active
- The 3 or more accounts would have a whole line of As in the column of recent repayments
- None of them has an overdue balance
- There are no other adverse records like defaults, settlements, bankruptcy, etc
This would be a very clean record record with no adverse indications of bad credit behavior.
Such information contained in a report would almost certainly pass the basic credit scoring conducted by lenders when assessing loan applicants.
If you have never taken up any types of loans or credit cards, and have an intention to apply for loans from a bank in the near future such as a housing loan, it might be useful to get a credit card on record, start to use it and make prompt full repayments consistently.
This is so that a lender would be able to see that you have been a good paymaster in recent history instead of having no material information to assess your creditworthiness on.