When a bank decides on a mortgage loan amount, they consider not only the applicant’s income, but also check their TransUnion credit report.
The credit report tells a lot about the applicant’s financial health. In this article, Spacious will teach you how to read the credit report and improve your credit score.
Jump to: What is a Credit Report? | Contents of a Credit Report | Access to Credit Report | Credit Rating | Use of Credit Rating | Factors affecting Credit Rating | How to Improve Credit Rating | FAQ
What is a Credit Report?
If you have applied for a credit card or a loan, you will have a credit report that belongs to you.
The credit report records your loan activities, such as the number of credit cards, repayment records, private loan amounts, mortgage payment records and so on. If you ever have defaulted on payments, declared bankruptcy or had any outstanding debts, the credit report will have the details.
In Hong Kong, TransUnion (TU) is currently the only organization that provides personal credit reports. Generally, before the bank approves your mortgage application, it will first check your TransUnion credit report to understand your financial reputation.
There are many private financial institutions that will market their financing plans as “no TU”. They aim for borrowers who are unlikely to get funds from banks for having outstanding debts.
Contents of a Credit Report
The information in a TransUnion credit report is provided by TransUnion members (including banks and financial institutions). It includes the following:
Basic Personal Information
Such as your full name, ID number, date of birth, address, phone number, and other public records such as civil litigation, debt collection, bankruptcy and liquidation records.
Credit Account Information
Such as credit card usage, bank loans, private loans and repayment records.
Inquiry Records
Records of TransUnion members (banks and financial institutions) who have made inquiries into your credit report within the past 2 years.
Credit Rating
Lending institutions may check your TransUnion report and calculate a credit score based on the information obtained, which will be displayed in the report. TransUnion members provide credit account records to TransUnion every month.
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Access to Credit Report
Apart from yourself, lending institutions (such as the mortgage bank) also have the right to access your TransUnion report to understand your credit status. In special circumstances (such as court orders), TransUnion may also provide your report to “relevant parties”.
Credit Rating
It is a rating derived from the information in your TransUnion credit report – repayment records, outstanding balance and other credit-related information – which ranges from A to J – A being the highest and J lowest.
| Rating | Class | Credit Score |
| A | Excellent | 3526 – 4000 |
| B | Good | 3417 – 3525 |
| C | Good | 3240 – 3416 |
| D | Fair | 3214 – 3239 |
| E | Fair | 3143 – 3213 |
| F | Fair | 3088 – 3142 |
| G | Poor | 2990 – 3087 |
| H | Poor | 2868 – 2989 |
| I | Poor／Very Poor | 1820 -2867 |
| J | Poor／Very Poor | 1000-1819 |
Use of Credit Rating
Credit rating can affect your future credit approval, such as applying for a mortgage loan. The bank will consider your credit score to determine the loan amount you are eligible for.
If the rating is not good enough, you may not borrow up to the maximum loan-to-value ratio. In addition, the bank may also increase the interest rate on the loan because of the less-than-ideal credit rating.
Factors affecting Credit Rating
1. Repayment History
If you have ever defaulted on a payment, even if it’s just overdue for one day or one instalment of mortgage missed, it will be recorded on your credit report and affect your credit rating.
2. Credit Mix and Account Types
Be careful if you have a variety of credit types such as credit cards, bank mortgages and private loans. Having too many accounts can lower your credit score.
3. Available Credit Limit
The higher the net authorized credit limit for all your credit cards, the higher your credit rating.
4. Credit Utilization Ratio
It is the outstanding credit balance divided by the total authorized credit limit for all credit cards. It is recommended to keep the credit utilization ratio at 30% – 50% or lower. Going above 50% will negatively impact your credit score.
5. Credit Inquiry History
If you have applied for credit cards, auto loans, private loans or mortgages within the past 2 years, the inquiries made by financial institutions to the TransUnion will be recorded. Having too many inquiries can lower your credit score.
However, if you have already borrowed a loan and the financial institution periodically queries your basic information such as your name, address, and phone number from the credit bureau, or you apply to access your own credit report, it will not be counted against you.
6. Credit History Length
When you apply for your first credit card or loan, you start building a credit history. If you have a habit of making payments on time, the longer your credit history, the better it will be for your credit rating.
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How to Improve Credit Rating
Spacious shows you 6 ways to improve your credit rating and clean up your credit record:
1. Repay on Time
The most basic requirement is to repay on time, which shows your sense of responsibility towards credit and good financial habits.
2. Apply for Higher Credit Limit after a Salary Increase
The next step is to consider ways to increase your available credit limit, such as applying for a credit limit increase from your credit card bank after your income increases.
3. Keep an Eye out for Credit Cards that Suit you
Even if you don’t often use credit cards, you can regularly check if there are any credit cards suitable for you to apply for, with the goal of increasing your overall credit limit.
4. Maintain a certain number of credit cards
Even if you have credit cards that you don’t often use, hold on to them anyway. The higher your overall credit limit, and the lower your credit utilization rate, the more advantageous it is for your credit score.
If the credit card has no annual fee, the cost of holding the card is almost zero. If you need to use a certain amount of credit to obtain an annual fee waiver, you can consider spreading your expenses across different cards to meet the waiver requirements.
5. Apply for co-branded Credit Cards
Having a long credit history of repaying on time is good for your credit score. Most local colleges and universities offer co-branded credit cards for students to apply for, and some co-branded credit cards still offer annual fee waivers even after graduation, which is very useful for establishing a credit history.
6. Obtain a Supplementary Credit Card from your Parents
If your parents use credit cards and have good financial management, you can ask them to apply for a supplementary credit card for you. This way, you can establish a credit history early on and have the positive repayment data from your parents displayed on your own credit report, which is beneficial for your credit score.
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FAQ
How long will the information in the credit report be kept?
Positive information, such as timely repayment, will be kept in the credit report until 5 years after you cancel the related account.
Negative information, such as overdue repayment, will be deleted 5 years after the loan is repaid, and bankruptcy records will be kept for 8 years. In other words, if you want to “clean up” your credit record, you generally have to wait 5 to 8 years.
How can I find out if someone else has accessed my credit report?
You can register for the “Credit Report Alert Service.” When a bank or financial institution requests your credit report, you will receive a notification via SMS and/or email.
