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Written by: Christopher Chitty 

Your salary, job and other financial details will affect your loan request but your personal credit score is the tipping point. It is a key factor which determines if you get that loan for your house or not.

In other words, if you have a good job, good salary and your other financial details are good but your credit score is low because of many payment defaults and debts, you will not get a loan.

A bad score will put you in a very bad situation and since borrowing money in Singapore is almost a necessity for most medium waged workers, it is imperative to ensure your credit rating is healthy.

But credit rating does not only affect your prospect at acquiring loans for your house. If you are a budding entrepreneur, being able to get a loan is the first step to starting your business.

As it is not uncommon for people to funnel personal cash into a business or use business funds for personal obligations, the connection between the personal credit score and the business loan is an intricate and intimate one.

This is especially so for entrepreneurs as no prior business credit history had been established. The personal credit there then becomes the only financial measuring stick lenders will have of you and they will use it explicitly to ascertain your credit worthiness.

If you are a financial risk because your score is unhealthy, you can expect to not get that loan.

How often you default on payments will factor largely into this. Lenders will want to check your credit history so having too many frequent late payments will imply that you are irresponsible with your finances.

Different lenders will have different risk policies however, so even if one rejects your proposal for a loan, another might approve it. The recent credit history is most often looked at to gauge financial responsibility. This is because it will take time to correct a bad score and as long as the recent history shows a marked and consistent improvement, the banks and financial institutes will take this under consideration.

If you declared bankruptcy at one point but have since cleared all charges, you can clarify the circumstances which led to bankruptcy in an accompanying report. Some banks may not consider you but others might as long as you are no longer bankrupt.

As bankruptcy can stay on your record for seven years or more, it would be wise to ensure you have sufficient time between the period of your bankruptcy to clear your record and when you embark on a venture. Past creditors may also come forward to claim their debts after you are discharged so it is prudent to have enough cash on hand to clear those debts if they come forth before you apply for a business loan.

If compassionate type reasons led to your bankruptcy, such as having to pay for high medical fees for a family member, you should inform the lenders of this. This can be considered an exceptional circumstance beyond one's control.

Some might be forgiving in this regard and extend you the loan, provided your credit score prior to the bankruptcy is healthy.

If you had many defaults on your credit rating before filing for bankruptcy, your plea for leniency may go unheard.

The best thing to do before embarking on a business venture is to correct your score. Always ensure that your personal credit rating is healthy.

For more information pertaining to a bank's lending decision, you can read more at the Credit Bureau of Singapore (CBS).

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