The allure is obvious: Get perks such as air miles, cash rebates, or rewards points for spending on things you like. But there is a bigger draw in getting a credit card as soon as you can that is often overlooked.

If you use your credit card responsibly, it helps you when you are applying for a loan later for, say, a car or a house.

How long you have been using a credit card, how much you have charged to it, and whether you are prompt in settling your bill are some of the things banks consider when you ask for a loan. (Banks keep score internally, if you are a customer; they also go to the Credit Bureau Singapore (CBS) for a consolidated report.)

If you have a long history of being a reliable user of credit, it helps in banks’ assessment of whether you are likely to make good on the loan they give you. And if banks do not have a clear idea of your credit history, that may give them pause in their confidence in lending to you.

Having a good credit reputation is vital not only when you apply for loans, it also says a lot about a person’s financial soundness. Some may even link it to a person’s integrity, honesty and credibility in the workplace.

Using credit cards responsibly

Using a credit card can be a double-edged sword. It helps you to buy things without using money in your bank account immediately. In other words, you can buy things but pay for them later on, even with interest-free instalments.

But misuse credit cards and you may find yourself trapped in a debt nightmare which you could take months to extricate yourself from. If you are late in repaying your credit card bill, you will have to bear high interest rates of around 25%.

You also should not apply for too many credit cards at once or have too many credit cards on hand. Even if you do not use all these cards, you may come across as credit hungry to banks and financial institutions when they are deciding whether to approve or reject your credit application.

What is your credit report

Your credit score ranges from 1,000 to 2,000; the score is often telling of your creditworthiness in repaying your debts.

Besides this score, your credit report, which you can get free whenever you apply for a credit facility or pay $8 for anytime, also shows all records of your credit payment history compiled from all retail banks, credit card issuers and major financial institutions in Singapore. It is crucial to understand your own credit report as lenders such as banks and financial institutions will use it to check and assess your credit worthiness before making any lending decision.

CBS’ credit reports can be obtained at the following avenues:

1. Online via Singpass at the CBS website
2. Personally at the CBS office at 2 Shenton Way, #20-02 SGX Centre 1, Singapore 068804
3. At any SingPost branch     

By studying your own credit report, you could better understand how important it is to repay any debt you may have, and see any new information that was uploaded into your credit file. Should you find any inaccuracies in your credit report, please contact CBS.

To improve your credit score, pay your bills on time, all the time; avoid applying for multiple new lines of credit within a short time; and keep your credit active.

This article was contributed by the Credit Bureau Singapore (CBS).