What affects your credit score the most?

Need some cash for an emergency, purchase or investment? You have several options, including taking a bank loan, using the credit on your credit card, or borrowing from a licensed moneylender in Singapore.

For many, getting a bank loan (especially for an amount that isn’t large), can be troublesome and very time consuming. Meanwhile, our previous article highlighted the peril of “borrowing” from your credit card – where interest rates up to 26.9% await unsuspecting borrowers – so we hope you rule out that option, under any circumstance.

This leaves licensed moneylenders as the best option for many Singaporeans. However, many residents hold back as this question looms over them,

Before we dive right in, we should try to understand what a credit score actually means. Well, a credit score is a scale of creditworthiness of a person that is determined by several factors and is calculated by a central credit bureau. The scale runs from 300 to 850, and the higher the score, the easier it would be to attain a loan from an entity or a moneylender in Singapore.

A credit score is a major parameter that is used the determine a person’s financial health and discipline and is taken into account by the entities like banks and moneylender in Singapore to determine the terms of the loans with the borrower.

Does loan from money lender affect my credit score?

Don’t worry, we won’t clickbait you into reading the entire article in search for the answer. The answer is, quite simply, no – your credit score won’t be affected at all while taking loan from licensed money lender in Singapore.

To understand why, let’s dive into why many Singaporeans have this misconception in the first place.

Licensed moneylenders are NOT loan sharks

It’s important to know that a licensed moneylender is exactly that – a lender that is licensed by the Registry of Moneylenders Singapore and operates legally, under strict regulations and within our nation’s compliance-heavy financial environment.

You can rest assured that skyrocketing interest rates and any practice of hanging animal heads at your door, are out of the question for legal moneylenders – and can only happen when borrowing from loan sharks (which are unlicensed and illegal).

Legal moneylenders are recognised by CBS

Because licensed moneylenders are recognised as legitimate businesses by the Registry of Moneylenders Singapore and Credit Bureau Singapore (CBS), the act of borrowing money from a legal moneylender won’t affect your credit score – as it would be similar to borrowing from other legal entities, like your bank.

In fact, legal moneylenders in Singapore even use CBS reports to determine a person’s credit worthiness, before deciding the terms of a borrower’s loan.

Top Factors that will affect your credit score

Now that we’ve determined your credit score won’t be affected by borrowing from a licensed moneylender, it’s time to explore the real factors that can lower (or raise) it.

Credit account history

A person with an established credit history will have a higher credit score than someone with an unfavourable or limited credit record. In simple words, this means if you have a track record of paying back your loans and credit cards on time, your credit score will reflect this positively.

What most people won’t realise though, is that if someone with limited or no history of borrowing (and returning) money, will have a worse credit score than a frequent borrower – as there is also no history of the person returning money on time.

Simply put, borrowing money can positively impact your credit score – just be sure to return your loans on time! (No matter who you’ve borrowed from.)

Not making timely repayments

As referenced above, while it’s fine (and even advantageous) to borrow money from banks or licensed moneylenders, your credit score will be negatively affected if you fail to make repayments. This is true regardless of the type of loan done, or the institution the loan was made – whether it’s your mortgage, monthly credit card payment, bank loan, etc.

The lesson here? Make your repayments on time to keep your credit score high!

Recent credit

Do you only borrow money on occasion, and in moderate amounts? Or are you overextending your finances within a short period of time? CBS advises residents to only apply for new credit in moderation, and if your bank loans and other financial records should that you could be overborrowing, your credit rating could fall.

Enquiry activity

Interestingly, your credit score can drop even without you taking (or missing repayments on) any loans – and this may happen if there is an influx in enquiries into your credit report.

This occurs because whenever you try to take on a new personal loan or home loan or sign up for a new credit card (among other reasons), the financial institution may make an enquiry into your credit report. Get too many of these queries coming in, and your credit score may be lowered.

Find out your credit score from CBS

For more information on what could affect your credit score, we recommend going directly to the source and visiting CBS’ website. There, you will also find a collection of factors that can lower your credit rating – and you can rest assured that borrowing money from a licensed moneylender in Singapore isn’t on the list.

While you’re there, you can also purchase your credit report from the bureau for just over $6, should you wish to find out your current credit score.

Quick Loan is a licensed moneylender and is recognised by the Credit Bureau of Singapore. This makes it a reliable source for loans. Moreover, the qualification requirement of moneylenders is far less compared to the banks and other money-lending institutes.

Moreover, taking a loan from a licensed money lender would not affect your credit score as they are legal entities. Borrowing money from them is similar to borrowing money from other legal institutes like banks. Besides, unlike unlicensed money lenders, they won’t escalate the interest rates or manipulate the data without you knowing. Licensed money lenders are a safe and reliable source to borrow money.

The aforementioned points should help put your mind at ease regarding credit scores, and a loan from a licensed moneylender wouldn’t negatively affect your scores in any manner whatsoever. If you want to improve your scores nonetheless, there are a few methods in which you can do that, and one of the simplest ways would be by repaying the loan on a timely basis. Financial discipline is the most important aspect that you must focus on if you want to maintain a healthy credit score, and keeping the score at optimal levels in Singapore would help secure credit easily, and without having to face any difficulties whatsoever.

The importance of keeping your credit score high

We hope this article has thoroughly explained why borrowing money from a licensed moneylender in Singapore won’t affect your credit score, and has put your mind at ease. More importantly, we hope you have a better understanding of what can affect your credit rating – and what you can do to raise your score, so getting loans from legal entities will be easier, faster and more seamless.