We all know how important a good credit score and credit history is when it comes to loan approvals. Large loans for big-ticket items like cars or houses will typically require banks to look through your credit history and make sure you're a timely paymaster in good standing. That being said, any method of improving credit score is always welcome. What if we told you there's an easy way to maximise your credit score right before your apply for your loans?
How Banks Collect Your Credit Score
A bank would take your latest CCRIS (Central Credit Reference Information System) report to assess your credit history. The CCRIS report displays your total amount outstanding as well as your payment patterns for each facility that you have with all the banks and student loans which you have taken under PTPTN.
They then calculate your monthly commitments towards these debts, against your monthly salary. This is done to determine the percentage of your salary that is going towards commitments. As a general rule of thumb, banks will allow you to have a 40% debt service ratio before they further consider your application.
So, despite paying on time and in full every month and having good payment habits, you could still end up with your loan application being rejected for a poor credit score. This is because at the time they pull the report you may just have swiped your card for a RM10,000 honeymoon and that would contribute to your debt service ratio being high although you were intending to pay the full amount at the end of the month.
How Do You Fix This?
Timing is important in this aspect. When you are intending to make a purchase for your big-ticket items such as a home or a car, try to clear up as much debts as possible on your record. We would recommend taking a two month head start. If you think you can do it within the month itself, be sure to make all your payments and clear those pesky credit card debts particularly, before applying for your housing loan.
At the point of application, try your level best not to make any further big ticket expenses on your credit cards as well to ensure your outstanding debts remain low. The report produced will then show that your total amount being owed to the banks are low and with a good credit history of paying on time would in turn give you a slight boost to your credit score.
Boost Your Score Now!
Of course there is no guarantee that your loan will be approved as all banks have different rules and regulations that they use to determine a loan approval, but this is a good way to increase your chances.
If you would like some futher tips on how to manage some credit card debts, do check out our article on “4 Credit Card Habits of People with Excellent Credit”
Be sure to try out these tips when applying for your next big ticket item. If you would like to apply for a home loan, check out our website and use the comparison tool to find one that works best for you.