Getting a Loan from a Bank even with Bad Credit

Whether you want to meet a short-term expense like buying home appliances, going on a vacation or dealing with an emergency or you want to meet a long-term expense like acquiring an asset like a property, a condo or a car, as a typical Singaporean you will turn to a bank for a personal loan, a home loan, an auto loan or any other credit facility.

Which is why the consumer lending statistics published by the Monetary Authority of Singapore for the month of August 2016* indicate total consumer loans at S$ 246,533.4 million!

However, getting a loan can potentially run into a major stumbling block – bad credit scores. Let us explore this topic in a little more detail:

What is a credit report#?

When you apply for a loan, the bank to which you’ve applied will check your creditworthiness before it decides whether to extend a loan to you. Your creditworthiness is determined by your credit report. Your credit report will usually contain the following:

▪ Your personal data – Information such as your name, NRIC & date of birth
▪ Your current credit relationship summary – Summary of the number of credit facilities you hold & any defaults thereon
▪ Your credit facilities information – Information on the credit facilities you have with the bureau’s members & your repayment history for the last 12 months
▪ Inquiries summary – Number & type of inquiries by financial institutions into your credit report
▪ Default records – Information on any default in repaying your credit facilities, including the balance outstanding & the current status of the account
▪ Bankruptcy records – Information on whether any bankruptcy proceedings have been taken against you, obtained from the Insolvency and Public Trustees Office & displayed for 5 years from the date of discharge

Who provides your credit report?

There are only 2 credit bureaus that have been accredited by the Monetary Authority of Singapore (MAS) – Credit Bureau Singapore (CBS) and DP Credit Bureau (DPCB). Only these organizations can provide you with your credit report.

How can you view your credit report?

You can buy your credit report from the two recognized bureaus either online or by visiting the bureaus at their offices. You will need your SingPass ID and password. You may also need to pay transaction fees for purchasing your credit report.

You can also consider monitoring your credit score by subscribing to the “My Credit Monitor (MCM) service offered by CBS. This service alerts you to any suspicious activities like identity theft or changes that can affect your credit reputation. You can sign up for it at any Singapore Post branch or at CBS’ main office.

Why do I need my credit report?

Your credit report will help you understand whether your credit worthiness (or credit score) is high or not. When you know your credit score is high you can safely apply for that loan; when your credit score is bad, you will need to take corrective action to avoid your loan application from getting rejected or getting an approval for a lesser loan amount.

Should there be discrepancies, or if you disagree with some information in your credit report, you can write to the respective credit bureaus with your clarifications. A notice will be posted in your credit file while the credit bureau investigates. If an amendment is subsequently made, a revised report will be sent to all credit bureau members who have made inquiries on you in the past 3 months.

What can I do to bring my credit score up again^?

Take these broad tips into consideration as you go about repairing your credit score:

▪ Repay outstanding/overdue credit on time
▪ Keep the number of credit facilities manageable
▪ Clear bankruptcy / litigation
▪ Check your consumer credit report regularly (at least annually) to ensure there are no errors reported. This is especially important when you intend to apply for new loans or credit facilities.

* This includes the following categories: housing and bridging loans, car loans, credit cards, share financing and others.
# Data source: eCitizen portal of the Government of Singapore.
^ Data source: DP Credit Bureau Singapore.

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How to get instant approval for personal loans

Personal LoansWith more than S$39,000 million in consumer loan borrowings in October 2014 alone (as per data published by the Monetary Authority of Singapore[MAS]), it is pretty apparent that personal loans are a popular loan / financial product with Singaporeans, especially given the generic and highly flexible nature of the product. And, most Singaporeans would have experience availing of or applying for a personal loan. We’ve tried to put together a few pointers that could help you obtain quick approval on your personal loan application:

Apply with your regular bank – Put your existing banking relationship to good use! Your regular bankers would already have a pretty good idea of your financial history and current financial status based on your banking with them. If you have already applied for and repaid a loan with them or if you have a credit card issued by them on which you are maintaining a good credit standing (for example, by making payments in full every month) you would have established a good credit history with them. So, if you apply with them they would be in a position to process your application faster.

Check your DSR – To put it simply, your Debt Service Ratio is the ratio of your monthly debt obligations to your monthly income. As a rule of the thumb, banks in Singapore generally look for a   DSR of around 50%. Calculate your DSR by totaling your monthly debt payments (credit cards payments, any loan installments etc) and subtracting it from your monthly income.

Ensure a healthy credit score – The Credit Bureau (Singapore) Pte Ltd and the DP Credit Bureau Pte Ltd are gazetted by the Monetary Authority of Singapore and you can obtain your credit score from them on payment of a relevant fee. A good credit score helps you gain faster loan approvals; if not, take steps to bring up your credit score. Remember, the MAS prohibits the grant of credit to a borrower whose debts with a Financial Institution are 60 days or more past due.

Keep all your paperwork ready – Every loan application needs to be accompanied by evidentiary identity and income documents. You can expect the lending bank to ask you any of the following: copy of NRIC or passport, CPF contribution history, latest Income Tax assessment notices, latest computerised pay slips, bank statements etc. And, if you have variable income you will require documentary proof of the commissions you receive, fees from clients, rent collected etc.

Keeping all the required paperwork organized and ready will help you to quickly submit a loan application and get a faster response.