You will be able to name the behaviours that tend to weaken or strengthen a credit record over time.
Two years ago Priya paid a card bill three weeks late because the statement went to an email she no longer checked. She paid the balance and the late fee as soon as she noticed, and forgot about it. Around the same time she applied for two new cards in one week to collect sign-up gifts. Neither event felt like much. Both are now sitting on her credit report.
Credit Bureau Singapore does not publish the exact formula behind its risk grade, and you should be wary of anyone who claims to know it. What is well understood is the kind of behaviour that pushes a credit record towards the low-risk end or away from it. This lesson goes through four of them, from the one that does the most harm to the one that takes the longest to help.
Your repayment history is the core of the report. Each month, every lender that reports to CBS records whether you paid as agreed. A payment that arrives a few days late is a small mark. A payment that is a month late, then two, then three, is a much bigger one, and an account that stops being paid altogether and ends in a default or a write-off is the most serious entry a report can carry.
Two things make the harm grow. One is how late the payment was: missing one due date is less serious than falling months behind. The other is how often it happens. A single late month inside years of on-time payments reads like a slip. Late payments every few months read like a pattern, and lenders price patterns.
This is why lesson 2.3, Cash advances, late fees and other costly card charges, recommends paying your card automatically. A late payment does not always mean a money problem. It can be a forgotten due date, an old email address or a GIRO arrangement that lapsed when you changed bank accounts. Priya's three-week delay came from exactly that.
Paying on time is not the whole story. If you hold S$10,000 of credit limits across your cards and regularly owe S$9,000 on them, a lender sees someone who is close to the edge of what they can borrow, even if every minimum is paid on the day it is due.
High use of your available limits can signal stress because it often comes before trouble. People who are about to fall behind tend to lean harder on their cards first. Owing a small share of your limits, and paying balances down rather than carrying them, tells a lender the opposite.
The fix here is fast compared with the others. Once a balance comes down and is reported lower, that part of your record improves with it. Getting there is what modules 2 and 6 are about.
Every time you apply for credit, the lender checks your report and an enquiry is recorded. One enquiry is normal. Several in a short space, like Priya's two card applications in one week, or a run of loan applications to different banks after a rejection, form a cluster that a lender can see.
A lender reading that cluster may wonder why you need so much credit so quickly, or whether other banks have already said no. Applying for credit to collect sign-up gifts can leave the same trail as applying because you are short of money, and the report cannot tell the difference.
The practical rule is to apply only for credit you intend to use, and to space applications out. If one bank turns you down, find out why before you apply anywhere else, as lesson 1.2, What lenders look for besides your report, suggested. How long enquiries stay on the record is set by CBS, so check its website for the current period.
The last behaviour is the slowest and the only real repair. Once the late payments stop, every month of on-time payments adds a clean line to your history. Over time the older problems carry less weight against the newer good record, and how long each type of entry stays on file is set out by CBS.
There is no shortcut. Paying a company that promises to clean up your record will not remove accurate information, and closing all your cards does not erase your history. The only thing that changes an accurate record is new behaviour, reported month by month. What you can remove quickly is wrong information, which is what lesson 1.4 is for.
Priya's record shows both kinds of entry. There is the late month from two years ago and the two enquiries from the same period, followed by about two years of on-time payments since. That later run is already doing its slow work.
These four behaviours give you a way to look at your own past without a copy of the report yet. Go back to the list you made in lesson 1.1, with every card, loan, credit line and instalment plan from the last three years. Next to each one, think about whether you ever paid late, how close to its limit you usually ran it, and when you applied for it compared with the others. The two habits that keep coming up are the ones to work on first.
Compare your list from lesson 1.1 against these behaviours and write the two habits most likely to be affecting your record.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).