Reasons Not to Worry About Credit Score Even If It Matters

One of the things that help lenders determine a borrower’s creditworthiness is the credit score. It represents how financially stable a person is and whether they can repay borrowed money. Or we are led to believe so. 

While credit scores are important, borrowers—especially first-time borrowers—shouldn’t fuss too much about it. 

Understanding Credit Score and Its Importance

A credit score is a reflection of a person’s borrowing behavior. This number—typically going anywhere between 1 (lowest) and 1,000 (highest)—is computed based on your credit report information. Bureaus, like the Credit Bureau of Singapore (CBS), keep track of all sorts of credit information. Several factors determine your credit score, such as timely loan or credit payments, credit utilization ratio (more on this later), and credit history length. 

Having a good credit score in Singapore could lead to:

  • Lower Interest Rates: A high credit score qualifies you for lower interest rates, which means bigger savings over the loan’s term, especially with significant loans like mortgages or car loans. 
  • Better Credit Card Deals: Similarly, higher credit scores open doors to premium cards with better perks, rewards, and exclusive offers. 
  • Potentially Lower Insurance Premiums: Many might not know this, but several insurance companies consider credit scores when computing premiums. 

5 Reasons Why You Shouldn’t Overworry About Credit Scores

All that said, there are benefits to having and maintaining high credit scores. But there are also circumstances when you don’t need to worry too much.

1. Building Your Credit History

New borrowers might not have high credit scores yet, but that’s okay. If you fall under this group, focus on building a good credit history. You can obtain a secure credit card or ask a primary cardholder to make you an authorized credit card user. Doing this lets you piggyback on their good credit behavior and get started with your credit history.

2. Alternative Financing Options

As a borrower lacking a good credit history, consider other alternatives. Peer-to-peer lending services, for instance, connect borrowers to investors offering loan options that are more flexible with credit scores. You may also take a shot at a licensed money lender online, as lenders like them are willing to work with first-time or new borrowers.

3. Negotiate Interest Rates

You don’t need a good credit score to negotiate for better interest rates, especially when it comes to personal loans. Lenders—like 111 Credit—do take credit scores seriously, but they also consider other factors like income stability, healthy financial management practices, and the loan’s purpose.

4. Limited Borrowing Needs

If you don’t see yourself taking out a significant loan amount soon—like a car loan or a mortgage—take the time to improve your credit score first. Keep in mind that credit scores matter when applying for big-ticket loans or credit card applications. If these are outside your immediate to-do list, focus on building good financial habits first.

5. Credit Scores Are Constantly Changing

While credit histories are permanent, they are also dynamic. This means that even if you make some bad financial decisions, time will help you improve your credit history with responsible credit management. 

  • Pay Promptly: Making on-time payments on your credit obligations is the most important factor in determining your reliability as a borrower. 
  • Minimize the Use of Credit: This is where the credit utilization ratio comes in. It represents the amount you owe versus your credit limit. Maintain a 30%-and-below ratio, and never max out your card if you want to boost your credit score. 

Wrapping It Up

While a good credit score is important anywhere, borrowers shouldn’t lose sleep over it. Instead of stressing over your credit score, build healthy financial habits to improve your credit history. It may take time, but it is worth it in the end. Consider alternatives like money lenders if you urgently need access to quick cash. To boost your credit score, CBS has valuable information and tools that can help you. 

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