A credit rating is an indicator of credit risk and credit quality of a prospective debtor, predicting their ability to pay back the debt based on their personal details, including: asset value, personal income, debt balance & status, repayment history, credit history, etc.
Credit rating in Vietnam is assessed by National Credit Information Of Vietnam (CIC), with the following scale: B, BB, BBB, A, AA, AAA (from lowest to highest). As AAA is known to be the highest credit level with lowest risk level, approval process for loan applications at this level would be significantly easier.
Credit rating plays a critical role for both customers and banks. Banks use this indicator to prevent risks and serve as a basis to guide customers when providing them with credit-related products, such as mortgage loans, home loans, etc. At the same time, credit rating helps customers to get better interest rates with their loans. The higher the credit rating, the more likely they would be able to increase their credit limit. Credit rating is the key for banks to verify the customer’s finance in the most transparent and accurate way.
Additionally, credit rating also helps customers to balance their spending in order to avoid getting themselves in bad debts, as having bad debts would make it difficult for anyone to apply for loans and installments in the future.
How to improve your credit rating?
1/ Check your credit reports regularly
Regularly checking your credit reports would help you to balance your spending and avoid any unusual transaction that would badly affect your financial history. To check your credit rating, you can either request CIC or visit http://www.pcb.vn (01 free access per year). To be more proactive with your credit rating, use internet banking and turn on email/mobile banking notifications to be up-to-date with your credit history, loans, late payment.
2/ Make sure you can afford your loans and pay your outstanding debts on time
Before applying for a loan, carefully consider and calculate the amount of Money you would need to pay for this loan every month and whether your monthly personal income can afford this. Besides more interest and late payment fees that you would have to pay for not paying your credit limit on time, you could also face bad credit rating.
For credit card payments, try settling your payment ahead of time to make sure your credit rating is always at the safest level. To make this easier, you need to find out all the information related to payment terms of your chosen bank upon applying for your credit card. Additionally, to make sure you can afford your credit card payment every month, always try to keep your outstanding payment lower than 30% of your credit limit.
3/ Keep the limit of 2 credit cards at the same time
Owning multiple credit cards at the same time is a minus point for your credit rating process. During the credit rating process, CIC allows banks to access all the information related to your currently-owned credit cards, including debt balance & status, repayment history and credit history. All these information have a significant influence on your credit limit assessment.
Additionally, this would also make it more difficult for you to balance your own financial source, as having multiple credit cards means that you are borrowing money from more than one place ahead of time. Several financial difficulties can arise if you lose control of your credit card payments and have to handle service fees, late payment fees and interests of multiple credit cards at the same time.
On the other hand, to protect your credit rating, keep in mind that you need to carefully check to see if you have paid off your outstanding balance before deactivating a credit card. Your credit rating would continue to decrease if you still have outstanding debt in your credit history. As all credit history is reviewed and evaluated carefully by CIC, you would easily be on the “bad debtors” list if you deactivate your credit card without setting your debts.
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