First Time Home Buyer Tips
Why Bank Reject Your Home Loan When You Have No Credit Record? (No Loan)
Many of us have traditional parents that told us to save money, get married, and buy a house.
I know it sounds boring. ( Literally, I was yawning thinking of this)
The truth is it’s imperative to save money when you’re young so that you can create wealth; you can buy a house, you can travel, buy things that you like, etc.
It’s also good to get married if you have found the one that suits you very well.
After getting married, you might need a house to raise your family. You can either rent, buy a house or combination of both. You can be renting for a couple of years while saving for the house down payment and buy a home later. It’s your choice.
When it comes to applying for a home loan, many young adults don’t have any loan facility with the bank. And if you think this is okay. I want you to think again.
In this article, I want to share one crucial point when applying for a home loan.
First Time Home Buyer Tips – Why Bank Reject Your Home Loan When You Have No Credit Record? (No Loan)
1. What do you mean by No Credit Record or No Loan?
No credit record is when a person does not have any loan facilities with any financial institution.
No credit record will reflect in the person CCRIS report; it will show no loan conduct.
It includes people who apply for a loan in the past and had fully settle the loan.
Note:
CCRIS stands for Central Credit Reference Information System.
CCRIS is a system that collects credit information on borrowers from participating in financial institutions and supplies the information back to them. This is one of the sources of information used by participating financial institutions to help them establish a view of the credit histories of potential or current borrowers. It is not a blacklist system as perceived by some people.
2. Why does CCRIS report important?
CCRIS report is the report used by all the bank to evaluate your financial and loan conduct.
It stands around 50-60% of the approval decision.
3. Why No Credit Loan or No Loan is a bad thing?
Well. It’s used to be a good thing, but we’re in the Year 2019, bank policy has changed – Not having any credit facility will lower your credit scoring.
When your credit scoring weak, these will happen.
a. Bank will reject your home loan application.
b. If a bank approved your home loan, they would slash your margin of finance. You might not get the maximum margin of 90%. The bank might cut to 70-80% margin. And it also means that you have to come out more on your down payment, 20-30% more.
c. Weak scoring also will affect your home loan interest rates. You’ll get higher interest rates and higher installment.
Overall, you want to avoid weak scoring.
4. What is the solution for this?
a. Apply at least a credit card.
You want to apply for a credit card six months before applying for a home loan.
Use your credit card, pay it on time, and clear all the outstanding balance.
It’s essential to clear your credit card balances, and if not, the bank will use it to calculate as commitment.
The formula to calculate your credit card commitment is as below.
RM3000 ( credit card outstanding ) x 5% = RM150
RM150 will be consider as commitment.
Always pay on time your credit card and never allow it to be over the limit. Use it up to 70% from the credit limit.
If your credit limit is RM3000, use up to RM2100 only. Try not to exceed it.
You need to understand; this credit card facility will be used as a benchmark on how you conduct your loan facility.
If you have defaulted the facility, over the limit or late payment on the facility, it will affect the home loan application.
5. My friend asked me to apply for a personal loan. Is this a good idea?
Well. It’s another way to beat the issue. But, I’d never encouraged to apply for a Personal Loan.
Why?
a. Personal Loan approval limit can be higher than Credit Card. And you have to serve an installment which can be higher than the Credit Card. And this installment will be taken as a commitment by the bank. Not Like a credit card, as long as you fully settle the outstanding balance, there is no commitment.
b. You can’t fully settle the personal loan for specific months while a credit card can. You can fully pay the outstanding balance at any time.
c. Gravitate towards a personal loan is not a good thing. Many people out there had taken a Personal loan and accumulate the debt way beyond their income. It’s not a good thing to apply for a Personal Loan when you don’t use it to grow your investment or money. But, if you use it right, you can increase your wealth.
Okay, so I hope you enjoy this article.
First Time Home Buyer Tips – Why Bank Reject Your Home Loan When You Have No Credit Record? (No Loan)
If you need any further Home Loan Advice, please feel free to call us at 012-6946746. ☎☎??
We’ll see you in our next article. Bye! ?♀️
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Melissa Lee?
Online Mortgage Consultant
012-6946746 (David)
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