Credit rating is the evaluation scorecard assigned to a prospective borrower in relation to their credit risk. Borrowers can be individuals, companies, or state governments. This rating is used by lenders to predict the probability that a borrower is likely to pay or default the loan. Credit bureaus, and not the lenders, formulate the score. Find out best way to check your credit score, The analysts in these agencies use the information provided by the prospective borrower, information on the public profile, and other unspecified sources to qualitatively and quantitatively determine the creditworthiness of and individual, state, or company.

Credit ratings can either be short term or long term. This follows the predicted time one is likely to get into the default stage. Anything less than a year is considered as a short term while above one year is deemed to be long term. With bad credit, you can hardly qualify for loans. It is always good to retain good credit. And by the way, if you need cash, consider instant loan Singapore.

Elements That Makeup One’s Scorecard

  • Payment History
  • The one imminent question in the lenders’ books is, will this be returned?

Lenders are likely to consider these factors;

  • Are your entire bills cleared on time in your scorecard report?
  • If there is a case of late payment, how later is it? 30, 100+ days?
  • Do you have any counts that have been sent to a forced collection?
  • Are you currently in bankruptcy, wage garnishment, or foreclosures lawsuits?
  • Record of negative public judgment
  • Time is taken since the last default and the frequencies of defaulting
  • Amount owing

It is possible that one can shoulder all existing credit commitments but, very close reach the ceiling. That is, the breaking point is not that far off.

Your current credits are compared to your available credit limits. The following factors are considered.

Have you used a big chunk of your available credit? It is worth noting that creditors prefer one to at least be in debt. They assume you are responsible financially, and you are likely to pay back when lent.

Do you owe other credit accounts?

Lenders like a mix of debts on a range of accounts such as auto, installation, credit cards, and mortgages. And you can responsibly manage all of the accounts.

Accrued Credit History Period

These three questions are often asked.

For how long have you operated your oldest account?

How many years have you been under credit obligation?

What is the mean age of your credit accounts?

Long credit history is advantageous. This is conditional as it has to have a good history of timelines and positive scores. On the other hand, a short history is not as bad if you make payments you owe in time and do not have large debts.

It is therefore advisable to leave old credit accounts open even though not in use. Since this boosts your credit score by the right margin.

New credit account

Also, put into consideration is the number of new accounts opened to access credit.

Whenever a new credit application is made, your credit profile is pulled out. The frequency at which this is done raises a red flag to the bureau.

In most cases, people do this when in a cash crunch or are trying to access more money than their limit on one account. This naturally shows that you are a credit risk. Other essential elements include:

  • Age
  • Marital status
  • Salary
  • Occupation
  • Current residence
  • Family support obligations
  • Employer history
  • Origin/nationality

Now let us jump into the possible reasons why you may have been turned down while applying for a loan in a financial institution or any lender. The common underlying factor in each such case is a bad credit rating.

Factors That Lead to a Poor Rating

Late payment.

Failing to stick to the agreement entered during application may prove detrimental. Late payment reports accrue on your profile over time. If this trend goes on for more extended periods, the credit bureaus rate your profile as poor.

Failure to repay.

 If any of your accounts report defaulting, your general score declines.


Declaring yourself bankrupt or being declared by the court suffers you a blow with lenders. This is a clear red flag that you are a significant risk to consider with creditworthiness. Same id viewed of a person who applies for an Individual Voluntary Agreement (IVA). This is a repayment agreement usually made between the lender and the debtor when the latter is unable to honor the obligation.

Standing trial.

Not all lawsuits have a negative bearing on your rating, but these two are. The trial in the county court judgment and a public judgment. If you are issued with a notice to appear in the county court judgment for matters finances, it is advisable to settle the plaintiff within a month, since such judgments affect your Scorecard negatively after six months. In addition, having a negative public image or you are subject to public scrutiny and judgment has a negative bearing on your rating. You might want to remain on the safe side.

Identity theft.

This is a tricky trap since it does not entirely depend on you and you might not even be aware that your identity has been stolen until you get huge bills and spending you don’t even remember transacting. This is a risk we all run when using online services. Even governments grappling with cyber-attack, right?

I am sure you have heard of one’s account being hacked into, so, in this case, one hacks your credit card and initiates large transactions. Before you realize it, your credit rating is down there begging. Lenders, primarily banks, have developed secure banking where one links the account to a personal e-mail to track unauthorized transactions. But even with this, cyber financial fraud is still chronic. So, it is prudent to protect that hard-earned quality rating of yours.

Lack of credit history.

It is safe to make sure you are on the safe side of debts. But as I highlighted earlier, not having a credit history translates to having no rating. I prefer a negative rating that no rating at all. In other terms, I am saying you should make sure you at least keep some credit history with the lenders.

The Bottom LineWhile your Scorecard is extremely important, it is not worth obsessing for. As we have seen above, it is not entirely your way you have to check. If you are financially responsible, your average rating will shine.