Lending and borrowing money from someone is a touchy subject that most of us avoid. But it’s one topic that banks do love to discuss. But even so, banks will take the necessary steps to make sure that we’re not going to run away with their money. Here’s where your credit report steps in.
In essence, credit reports are used by financial institutions as it tells about your current financial commitments and repayment history. It will refer to data that’s based on your credit history and will determine the risk that the bank will take when you owe them money.An ideal number for your CTOS credit score would be between 697 to 850, meanwhile for CCRIS that number would be between 7-10. A high credit score shows how much you’re committed to paying your debts on time, a low credit score will show that you’re not so qualified to take on another debt and will result in your loan application getting rejected, but don’t worry about it too much - because banks will also have their own scoring and evaluation criteria. The credit score from CCRIS and CTOS is just an indication, and there is a cheaper version of the report which does not even include the score to begin with.
Your credit report is also compared to another calculation called the Debt Service Ratio (DSR). This calculation is used to check if you can afford to repay the bank based on your monthly income, if they were to lend you the ca-ching. For more on DSR, CCRIS and CTOS check here.
So if your credit score isn’t where you want it to be, let’s work on that. You’re not alone, and improving your credit score takes time. So here’s your very first Pusat Tusyen Lesson on how you can score bright on your Credit Report.
It’s time that you PAY YOUR BILLS ON THE DOT.
It’s extremely important that you remember the due date for your monthly repayment that’s usually stated in your agreements. Pay your dues before the specified date so that you’ll avoid any late penalty fees. Since we’re human and can be a little forgetful or scatter-brained, look into these two methods that will help you with your payments: standing order and direct debit.
What they do is transfer the money from one account to another depending on the time period interval that you choose.
Pay off the ones with a high interest
Credit cards, followed by a personal loan have the highest interest rates. So when any of these debts are due, be sure to clear them off as quickly as you can so that your Debt Service Ratio (DSR) will have a nice percentage figure that lies below 50%. Here’s how it’s calculated!
So the trick is, the lower your DSR % is, the higher and better chance you’ll get to have your loan approved! The best range that your DSR % should be in is within 30% - 40%, before adding in the estimated installments for that home you want to buy. Ultimately banks will only allow you a DSR of about 65-75%. Here’s where you can find out how to calculate your DSR and what your Golden Budget rule should be here!
Stop applying for more loans.
Don’t listen to Nike this round. Just don’t.
Start building a healthy credit history
Some of you may think, “Well, in that case, I’ll make sure that I have no debt and no history of borrowing any money until I actually need it. That’ll solve it!” But the actual answer is no, not necessarily! Having no credit history will make the banks a little hesitant to give you a loan as they’re not sure if you’ll be a good paymaster.
So consider getting a credit card to help build your credit history. This will help the banks understand your risk profile and will land you the loan you want in the future. Sure, having a credit card will be tempting, definitely. But remain strict and firm about your budget and you’ll do just fine!
It’s okay if your loan application was rejected due to your credit score. What’s more important is that you take the necessary steps to fix it. Patiently and religiously pay your debts on time each month, budget right, and over time, you’ll see your credit score improve! You can also drop us a call if you’d like some financial consultation!
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