In Malaysia, people are often in the requirement of loans, especially to meet necessary or immediate requirements, such as a car or a new apartment, or even simple upgrade or renovate their home. But loans, can today, a little more difficult to get than it used to 10 years ago. This is mainly because the credit score is considered to sanction a loan by a bank.
In case you are not aware, Malaysia is one of those countries with a major debt issue in Asia. This means that people automatically have terrible credit scores which further lower their chances of getting financial aid.
So what can be possibly done?
Let us take it step by step.
Why is credit score important to banks in Malaysia, when sanctioning your loan?
Here are the major reasons why the credit score is collected by the bank and how it helps them consider a personal loan application:
In Malaysia, banks are able to collect the credit score information through the Central Credit Reference Information System also known as CCRIS. This is a government body which collects an individual’s credit history and spending details and then scores it to help understand an individual’s habits in personal financial matters. So, the information that, the bank receives is highly accurate.
Once the bank receives the information about the individual, they are able to find details about their income and how it is spent and on what.
The bank also is able to understand what sort of other financial products or liabilities does the individual have already such as credit cards and other loans.
- The style of the individual is also observed. Whether it is investments in savings plans or fixed deposits or no savings does also have a lot of impact on how the bank judges on your loan repayment capabilities.
- Banks are also able to determine whether the individual will be able to pay for the loans and often increases the loan tenure, along with increasing the interest rates for the loans based on the individual’s payment capacity.
- Sometimes banks check the credit score regardless of sanctioning the loan to increase or decrease the individual interest rates.
Hence, it becomes highly essential to portray a very good credit score to the bank so that you not only get a sanctioned loan but also have access to reasonable interest rates all payable at reasonable tenures.
Tips to quickly enhance credit score for loan applications
Here is all that you have to keep in mind, and take action to save you the trouble of a convincing the bank further for your loan application:
- Make a head start of at least two months
- Ensure that all your credit card bills are paid off without going for the 5% minimum.
- If you have home loans or car loans alongside your loan application, ensure that your instalments are up to date, because it shows increasing liabilities but also to be able to manage the excess liabilities.
- If you are not investing in savings, it might help to invest in a fixed deposit, since the bank wants to believe that you have enough buffer amount to be able to manage all your debts.
Avoid going for an excess number of loans at a time
Make sure that you are also making regular payments for your other financial liabilities such as life, car or home insurance.
Most importantly, do not ever take your credit score for granted, because the often you try for a loan product and you fail, the credit score will worsen. So, even if you make the quick fixes but are unable to keep up with your financial commitments, enhancing your credit score will not help.