Ouch! What’s Hurting My Credit Score?

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Ouch! What’s hurting my credit score

Have you ever been in a situation where you did everything right but still ended up getting hurt? No, we are not talking about heartache from your breakup. Imagine a situation where you’ve been eating healthy but still fall sick, catching you by surprise. The same holds true for your CBS credit report!

You might think that you’re doing everything right only to realise one day that your credit score is rolling down faster than a ball rolling down a hill. There are a hundred factors that hurt your credit score. But there are certain unknown factors that bring down your credit score immensely. Let’s look into those factors today!

Total Debt Servicing Ratio (TDSR)

The Monetary Authority of Singapore (MAS) in 2013 brought in the concept of TDSR which helps lenders assess the repayment capability of borrowers. In simple terms, TDSR is the maximum income that you can allot for your debt repayment.

Your TDSR cannot exceed 60% because if it does, then you future credit applications will certainly be rejected. This component is also used to assess your credit score. If your debt-to-income ratio is very high, then your TDSR will also be very high.

The relationship between your TDSR and credit score is like a seesaw. High TDSR means low credit score. So, start paying off your debt to get your TDSR down and your credit score up.

Missing payment deadlines

You might be wondering why your credit score is low despite you making full outstanding payments on your balances. Well, it is not only making payments that gives your credit score brownie points, it’s also important to make them on time.

It’s easy to forget your payment due dates if you have too many credit cards or other credit lines. So, if you’re finding it hard to keep track of all your payment due dates, then try balance transfer wherein you can transfer all your unsecured credit card debt to a single card. Or, opt for a debt consolidation plan. This way you only need to keep track of one payment due date for all your debt.

Related: How Do Balance Transfers Affect Your Credit Score?

Ignoring errors in your credit report

Let’s be honest here. How many of you double check a text message for grammatical errors before you send it to your crush? We can assure it is more than the number of people who would double check their credit report for errors.

It is scary, isn’t it, how we are more worried about scoring with our crush rather than increasing our credit scores? Slight discrepancies in your credit report can hurt your credit score. Credit report agencies can make mistakes too and it’s important to get these mistakes corrected before it’s too late.

Closing credit cards that still have outstanding balances

Another mistake people commit innocently is closing credit card accounts hoping to repair their credit score. Well, it does exactly the opposite of that! A part of your score is based on the total credit extended to you and closing a credit card with balance will remove a part of credit granted to you, which in turn hurts your credit score.

Imbalance of loans and credit cards

We can’t stress enough the importance of having a balance of credit cards and loans since it contributes to a part of your credit score. Having only loan accounts or credit card accounts can hurt your credit score, especially if you have a fresh credit history with not much information.

When it comes to your credit report, you must always remember that a credit report, which is suffering as a result of any of these reasons, could have a negative impact on your eligibility. That is why you must always make sure you maintain a healthy report. If your report is damaged then here is how you can crawl out from under a bad credit report.

 

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