1. Usage of credit cards
There is nothing wrong with having 10 credit cards but you must pay on time. The problem with credit cards is abusing the given credit amount – you swiped your credit card one time.. and then one more… and another swipe.. and at the end of the month you found out you have used more than you can pay – yikes!
I attend a talk by a professional bank officer regarding credit cards and it was an eye-opener. I found out that bankers will see you as having little money the more you use your credit cards. It is also recommended that you use a maximum usage of 75% of your full credit amount – recommendably 50% for better chances of getting your loan approved.
It is also recommended that you use a maximum usage of 75% of your full credit amount –
recommendably 50% for better
chances of getting your loan
It was also discovered that if ever, there is a record that shows you paid your credit cards late – there is high likelihood that your loan applications get rejected. To sum up, high use of credit cards equals high chances loan applications gets rejected.
So what’s a good credit card practice to get most of your loan applications approved?
- Maintain good track record of credit card payments
- Maintain credit card usage approximately 50% of total amount
2. Status of work or company
Lets say if you are a creditor or a bank yourself, would you be concerned what your debtors are working as? – of course you do!
From bank’s perspective, they do not know how credible you are and whether or not you are able to meet your commitments. This is why what you work as and who you work for are important.
Banks would normally opt to lend to people from companies with credible backgrounds and track records. A company that always pay their employees’ salaries or EPF fees late are excluded from being reliable.
The lenders would also need to have a job that can proof to the banks that they can ensure a continuous income to meet their monthly commitments to the banks. Banks would normally see contract-based workers as risky lenders because their work contract can be terminated at any time. But then again, in this situation maybe you will be able to convince the banks by your high savings amount – that may work.
Having a certain amount of savings is an extra point you get from the banks. It would be much easier for banks to assess your risks and behaviour from the money you saved. The best amount of savings is around 6 months of your salary – why so? This is because in normal circumstances people are able to settle down and look for a job or to restructure their short term plans within 6 months – I call this the calm down period.
‘The best amount of savings is around 6 months of your salary’
Savings can come from anywhere such as bank accounts, asb, tabung haji, or an investment account. However, savings are not income. Incomes are money that comes in your bank account on regular basis with an estimated amount each period unlike savings which you don’t earn on them.
What if you own company shares or you act as a shadow director for a company and receive dividends on it? Is it considered as income?
Yes! It is an income and I urge you to save the dividends as banks would see the dividend incomes as part of your earnings. Save around 30% to 40% of your income as this will help banks to determine your capability and credibility to meet your commitments with the banks – remember, every dollar you save is a dollar you earn.
4. CCRIS records
The Central Credit Reference Information System or commonly known as CCRIS is a system that helps gather credit information from borrowers who participates in financial institutions – banks, insurance brokers, or private companies in normal circumstances and produces credit reports (contains outstanding loans, special attention account, or bankruptcy status of a person) that will be utilise by the financial institutions. CCRIS record is important to gauge our financial capabilities.
So, what is a good CCRIS record?
- Your credit report shows 0:0:0. This is the ideal record because the higher the number means no months having outstanding loan. PTPTN, housing, and car loan is normally included as part of CCRIS assessment.
- No 12 months outstanding credit payments.
- No outstanding amount in your special attention account. Take note that you may thought that the card can cancel itself after you have used up all your credits with the intention of not using it anymore and you think its okay not to manually cancel it – this is where it gets scary. The credit you didn’t pay will be transferred into your special attention account and it will be there forever until you manually call the banks to cancel and pay the outstandings. Whenever you want to apply for a housing loan, make sure to clear any outstandings you may have due for a long time.
To sum it all, you will be able to obtain higher chances of getting your loan approved by applying the 4 main tips as aforementioned. Also, you may need to take into consideration of what you can actually own. Sometimes the banks may approve of your loan but you may face difficulties to pay the banks’monthly installments – so don’t bite more than you can chew. Take things slowly and enjoy your wealth growing process.