How to read your credit score report
In Singapore, credit card and loan approvals are heavily dependent on your credit score. This tangible score is seen via your credit report, which is issued by the Credit Bureau of Singapore (CBS).
Having your credit report around is always good, especially when you are about to take on a new loan or decide to apply for a new credit card. Read and understand what your credit standing is, and you will know if you are in good financial health to take on a new credit card or loan.
For first-timers reading a credit report, the process can be understandably mind-boggling. Fret not, the Bear is here to help you make sense of your credit report, covering the following main areas of the report:
- The summary
- The bureau score
- Credit history
- Default records
This provides a cursory summary of your credit history. It will note the number of defaults (unpaid debts), bankruptcy proceedings, and credit enquiries over the past two years. It will also note (as a simple Yes or No) whether you’re part of a debt management programme, and whether you’ve been the victim of identity theft. If anything in the summary doesn’t add up, contact CBS to clarify the issue immediately. Mistakes are rare, but they can happen.
The bureau score
The bureau score determines your credit worthiness. Via a secret algorithm, the bureau score determines the likelihood of you defaulting on a payment within the next 12 months. In addition, the algorithm will consider factors such as the number of credit enquiries you’ve been making and the number of credit facilities you’ve opened. From these calculations, you’ll be assigned a credit score:
- AA (credit score of 1911 to 2000) - less than 0.27 per cent chance of default
- BB (credit score of 1844 to 1910) - 0.27 to 0.67 per cent chance of default
- CC (credit score of 1825 to 1843) - 0.67 to 0.88 per cent chance of default
- DD (credit score of 1813 to 1824) - 0.88 to 1.03 per cent chance of default
- EE (credit score of 1782 to 1812) - 1.03 to 1.58 per cent chance of default
- FF (credit score of 1755 to 1781) - 1.58 to 2.28 per cent chance of default
- GG (credit score of 1724 to 1754) - 2.28 to 3.48 per cent chance of default
- HH (credit score of 1000 to 1723) - 3.48 per cent or higher chance of default
- Cx (Insufficient data to assign a score) - If you’ve never used a loan or a credit card before, this is your credit grade.
- Hx (Bankruptcy proceedings) - This means there’s a current or past writ of bankruptcy against you. Loans are generally not possible.
Having a higher credit score is definitely what you should be aiming for to smoothen your credit card and loan application process. You will start encountering serious loan approval issues, once you’re at the grade CC or below.
For example, say your credit score is 1837 (CC), and you apply for a home loan. Usually, the maximum amount you can borrow is 80 per cent of your property price or value. But because your creditworthiness is ranked CC, the bank may decide to reduce your maximum loan. You may only be able to borrow up to 60 per cent, instead of the usual 80 per cent.
If your credit score is 1813 or below (DD), it might not be possible to get a loan at all. Note that a bad credit score is not permanent. As you gradually repay your loans on time, your credit score will improve.
Notice how there is a Cx grade that does not have an assigned score? The Cx grade is a rare case that happens if you do not have any credit card or loan applications to your name. In this case, no score will be assigned yet as there is no indication of how credit worthy you are. This neutral grade is great if you are looking at smaller loans. But to be safe, try to push your credit score to a tangible one for banks to better assess your credit worthiness.
Read more: Credit score 101
This is the list of credit card accounts, personal loans, home loans, or any other sort of credit facility you’ve used. Any overdue balances are noted here too. Each credit account is accompanied by strings of 12 letters. These are divided into three rows. The first row reflects your repayment history on that account, on the given month. Here’s how the letters work:
- A – Paid 20 days past the last due date
- B – Paid 30 to 59 days past the last due date
- C – Paid 60 to 89 days past the last due date
- D – Paid 90 days or more past the last due date
- E – Account was closed, fully paid up
- F – Account was closed, but not fully paid up
- * - Account was open, but unused (e.g. you applied for a line of credit and was approved, but you never used it).
- G – You voluntarily closed the account and surrendered the collateral. The debt was still not paid up (e.g. you voluntarily surrendered a house to the bank, but the property loan was still not paid up after that).
- H – The account was involuntarily closed, and the collateral was surrendered, but the loan was still not paid up. (As with the example in G, except the bank may have forced the foreclosure).
- R- The account was closed, and the bank had to restructure the loan (e.g. change the interest rate, loan tenure, repayment periods, and so forth).
- S – The account was closed, following some sort of negotiation with the bank.
- W – Default
- M – The lender didn’t provide any data to CBS that month
The second row only shows the letters Y and N (for Yes or No). This details whether there was a cash advance, or balance transfer.
The third row only exists for credit cards. It also shows only Y or N, and simply states whether full payment was made for that month.
So how do you make sense of all the letters? For an optimal credit score, achieving an A on the first row is the best result you can hope for. The description of each letter is self-explanatory but generally you should avoid hitting the E and above range for a healthy credit score.
This is a record of any debts you’ve failed to pay, along with the dates and names of relevant institutions. If you are part of a Debt Management Programme, your status under the programme is described here.
Bankruptcy details are erased five years after receiving the official certificate of discharge from bankruptcy. This is also the case with most defaults, in which you have come to some form of settlement (e.g. restructured loan, or partial payment).
A complete default, in which you made no attempt to settle the debt, and the bank had to write it off, will remain on your credit score indefinitely. Needless to say, this should be as empty as possible for your credit score to stay healthy.
If any debt management programmes, banks, financial institutions, etc. have any comments to add, they will be made here. If you feel any of these are untrue, or incorrect, contact CBS for clarification.
Remember, your credit report matters
A credit report is more than a string of numbers and letters. Nor will knowing how a credit report should be read and understood put you in good financial standing. But when you can make sense of why your credit score is the way it is, you are in a better position to maintain and improve your credit score.