It is not unbelievable that some students or fresh graduates may not understand the relevance but building a good credit history is as important as achieving good academic results. While academic results help you to land a good job or get into your school or programme of choice, a good credit history may influence your chances of getting your dream job and applying for credit to finance the big-ticket items in life, such as a car or a house.
Importance of Having a Good Credit Reputation
A bad credit reputation is usually due to consumers not repaying their debts on time, which results in your credit score dropping significantly. On the other hand, a good credit reputation is a strong indication of a person’s financial soundness, competence, and capability. Therefore, your credit score may play a role in your approvals or rejections of not only credit applications with banks but could also possibly influence the outcome of your job applications.
Unfortunately, not many job seekers know that a below-average score grade may affect their future job prospects. Companies are increasingly conducting employment checks on prospective hires to minimise any potential cases of theft and embezzlement.
A low credit score may be correlated with irresponsibility and bad financial management
Companies are generally more inclined to hire those who come across as responsible, and your credit report is a clear reflection of whether a person has been responsible and diligent in his or her repayment. A low credit score may be correlated with irresponsibility and bad financial management, which poses a red flag to future hirers. Hence, it is essential to understand that having a good credit reputation may affect us in more ways than imagined.
Recruiters conduct pre-hire employment checks
Another vital consideration for recruiters is the possibility for the potential new hires to misappropriate funds. Illegal activities can take place at any level, not excluding those who are of upper management levels. Hence some companies diligently conduct thorough annual credit checks for all employees to prevent such unfortunate happenings.
Recruiters want to avoid legal liability
Companies may also want to avoid legal liability for negligent hiring. This is especially relevant for banks and financial institutions as they are closely regulated by the Monetary Authority of Singapore (MAS). As part of the Fit-and-Proper guidelines by MAS, they are obligated to do employment checks which include credit checks on pre-hires. Under MAS’s Guidelines on Fit and Proper Criteria, it is stated that be it an institution, exempt financial institution, exempt entity or a fund management company, they must satisfy MAS that “it has in place appropriate recruitment policies, adequate internal control systems and procedures that would reasonably ensure that the persons it employs, authorises or appoints to act on its behalf, in relation to its conduct of the activity regulated under the relevant legislation, meet the relevant fit and proper criteria of these Guidelines”.
Tips For Maintaining a Good Credit Reputation
Pay your bills on time and in full
If possible, always pay in full as any outstanding balances will be charged at an averagely of 24% p.a. You may consider repayment via GIRO to ensure payments are not late.
Note: Default records stay on your credit report for three years, while bankruptcy data is retained for five years even after full settlement.
Limit the number of credit cards you own
Cancel any unused cards – It is more manageable to keep track of 2 credit cards than 5. Don’t apply for a few credit facilities in a short span of time – This indicates to creditors that you are desperate for credit and are a risky borrower.
Pay down your debts and consider charging less
Lenders prefer to see more breathing room between the amount of debt reported on your credit cards and your total credit limits. The more debt you pay off, the wider that gap, the better your credit score.
Obtaining Your Credit Report
It is crucial to understand your credit report as this will be the same report which employers will receive during background checks.
In a nutshell, having good credit habits and prudent behaviour far outweighs the negative consequences of building or resolving a bad credit rating. It definitely pays off to start building your credit score early!
Brought to our students by Credit Bureau Singapore. Follow Credit Bureau Singapore’s (CBS) Facebook for more of such updates and tips on how to stay credit active!
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