So you’ve got a great credit score, and now you may be wondering: what can I do with it?
Well, the thing about good credit is that it gives you access to more credit facilities. Being in good financial standing also makes the application process smoother.
But we aren't just going to scratch the surface with this. Taking a deeper look, we explain what a good credit score can do for you in the long run.
Getting the maximum Loan-to-Value (LTV) ratio on home loans
The LTV ratio is the percentage of your house's value that can be financed by the lender. For example, if you have an LTV of 70 per cent, that means that you can borrow 70 per cent of your property price or valuation (whichever is lower).
The maximum LTV for a home loan, from a bank or financial institution, is 80 per cent. HDB loans can finance up to 90 per cent of your flat. However, it’s important to realise none of these LTV ratios are mandatory for borrowers.
A good credit score has positive implications for your LTV ratio. In this case, you are more likely to get the maximum LTV ratio. This is especially crucial for first-time home owners who can benefit from the additional breathing room afforded by a higher loan ratio and lower downpayment.
This is why it’s important to repay your loans reliably, especially in the 12 months leading up to your home loan application.
Point to note: having a good credit score doesn’t translate to a lower interest rate. It often just means you can borrow more, or get your loans approved with less hassle.
Read more: Credit score 101
Credit scores: what are they and how do they work?
How to read your credit score report
What can a good credit score do for you
How to maintain and improve your credit score
7 essential steps to keep your finances in check
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Raising the income ceiling on your credit facilities
If your credit score is good, you can request for your credit ceiling to be raised when you are anticipating a huge future transaction. For example, you are looking at paying $20,000 for a complete refurnishing of your home. You already have this amount saved up, so you could pay for it in cash. However, you’d rather pay for it with your credit card first, and then repay your credit card.
But why would you want to charge $20,000 to your credit card? Because that amount might get you enough air miles for a business class upgrade on your next flight, or you can get a $300 rebate if you have unlimited 1.5 per cent cashback. The whole premise behind the use of your credit cards is to optimise the accumulation of cashback, rebates and other rewards with this pre-planned spending.
Unfortunately, your credit ceiling is just $18,000. You can still call the bank and make a request. If they see that your credit score is excellent, they will most likely accede to your request and up your ceiling to $20,000.
Remember, the whole point of having a good credit score is to open up the possibilities of finding the right credit card that suits your needs. More importantly, use the credit card responsibly and pay the bills immediately to keep your credit score healthy, which in turn leads to more access to better credit facilities.
We can't stress this enough - pay your bills on time. While this is just one of the many ways you can maintain and improve your credit score, it's also one of the most important habit to adopt.
It can help you to get a job
For many finance-related industries, a good credit score is a must. For example, to be a financial advisor, your credit score will tell your prospective employer how apt you are at managing your finances before you advise others.
A good credit score is particularly relevant for roles dealing with cash, such as procurement. After all, employers would be more inclined to trust employees who are debt-free and equally free of temptation by the huge amount of cash they deal with.
Even in other lines of work, a hirer may request to see your credit score to gauge your level of trustworthiness.
To be clear, a prospective employer cannot pull up your credit score without permission. No one can access it besides yourself, or the recognised banks and financial institutions you’re borrowing from.
The possibilities are endless with a good credit score
What you really get out of a good credit score is more than seeing a string of numbers and letters that give you a sense of accomplishment and satisfaction. When you manage your finances well, the options that are available to you are aplenty.
Options, we say, that can lead to your dream, such as owning your very first home.