Opening a credit line long before you need money for business start-up or expansion is important because it’s hard to quickly get large loans when you need some
By: Phoenix Lee/
Despite the fact that banks are highly vocal about their woes of people going bankrupt and not paying them back, banks are more aggressive than ever regarding giving people personal loans and lines of credit. The thing that you want to do is to begin to build these lines of credit long before you have a business opportunity in your lap.
The fact is that unless you already have excellent credit and accounts open, it’s hard to quickly get some large loans. The best kind of loans that you will want are personal unsecured loans. Your credit cards are personal unsecured loans. You can march down to your bank and get a cash advance against them.
You can also have other open lines of unsecured credit. They can be with your local banks or lending institutions anywhere. The credit game has changed over the last recent years. Previously, there was more of a chance for your personal circumstances to outweigh other negative items that are on your report.
However, these days the big thing that all lenders look at is your credit score otherwise known as your beacon score. If you want to obtain loans then you need to understand a little bit about how this scoring system works. The truth of the matter is that it’s questionable at least in my mind if anyone really fully knows how they work. But here is a generalized explanation if you weren’t aware of it:
There are values assigned for all the different variables such as your:
- Repayment History
- Amount of Your Total Credit Line
- Amount of Debt Vs. Total Credit Line
- Type of Residence
- Years at Residence
- And others
A computer model then calculates the all of these variables by assigning weights and a credit score is created. The first step toward building your credit is to access your report from the credit bureau. Any Singaporean can obtain a credit report (which shows their credit grade) from the Credit Bureau of Singapore (CBS) for a fee of S$6.
Credit Score Risk Grades in Singapore
|AA (Score 1911 – 2000)||Probability of Default between <= 0.27%|
|BB (Score 1844 – 1910)||Probability of Default between 0.27% to 0.67%|
|CC ( Score 1825 – 1843)||Probability of Default between 0.67% to 0.88%|
|DD (Score 1813 – 1824)||Probability of Default between 0.88% to 1.03%|
|EE (Score 1782 – 1812)||Probability of Default between 1.03% to 1.58%|
|FF (Score 1755 – 1781)||Probability of Default between 1.58% to 2.28%|
|GG ( Score 1724 – 1754)||Probability of Default between 2.28% to 3.48%|
|HH (Score 1000 – 1723)||Probability of Default between >= 3.48%|
Source: Credit Bureau Singapore
The highest possible credit score risk grade is AA. Grades of B or C indicate delinquency or late repayments, and grades of D or lower are often caused by defaults (bank was forced to write off the loan).
Really, no matter where your credit score is unless you currently have the ability to go out tomorrow and get a line of credit for $250,000 on just your signature without anyone needing to approve or authorise anything, then you could use to improve your credit.
Let’s face it. If you can go out and just get $250,000 in a credit line, you’ve got a lot of freedom to make any business deal that you see fit.
If you have a credit line, here’s the fastest way to get those credit limits increased and get more of them. Start borrowing against the limits almost to the maximum. But – and this is a huge point: DON’T SPEND THE MONEY! Take the money you borrowed and put it in the bank where it can collect a little interest to offset any interest charges you might accrue.
Now, if you do have good credit already, then you won’t get hit with much interest charges because more favorable credit card terms don’t charge interest on the balance if the total balance is paid off in full at the end of the month. Either way, that’s what you do. Worst comes to worst, you have to invest a little money on interest for your future.
Now, start doing the same thing on your different credit lines. Each month you borrow large sums of money and pay them back on time and in full. Before you know it, you’ll be getting credit lines increasing offers to you and other lenders will be pounding on your door. Your credit score will go up.
How to Secure Personal Loans Quickly
If you have limited capital and are searching for personal loans to expand your business, good loan consultants can set you up on a path that can get you a it in a quick and seamless manner. Trusted loan consultants have close links with the best lenders in town and can help you compare various loans and settle for a package that best suits your needs. You should also find out about money saving tips.
You should also look at Affordability Tools which can help you make better loan decisions. Calculators can help you ascertain the fair value of a property, especially if you are looking for a home equity loan.
If you are looking for a new home loan or to refinance, Mortgage brokers can help you get everything right from calculating mortgage repayment, comparing interest rates all through to securing the best home loans in Singapore. And the good thing is that all their services are free of charge. So it’s all worth it to secure a loan through them for your business expansion needs.