If you are applying for a home loan, one of the things you need to know about is your credit record on CCRIS or CTOS because these are what the banks will be checking before they approve or reject your application.
What do banks look out for when you apply for a home loan? What exactly are CCRIS or CTOS? Both of these are credit reports that can help financial institutions assess your financial health and your ability to pay your monthly repayment.
And what is CTOS? CTOS is a credit reporting agency that collects and compiles data available from legitimate public sources and authorised government agencies to provide information about an individual or a company’s directorship and business interests, litigation and legal information, banking payment history (CCRIS summary, details and derivatives), and trade reference details.
If you have a bad credit record on CCRIS and CTOS, which is commonly referred to as “blacklisted by CCRIS or CTOS”, all is not lost.
To find out how you can clear your CCRIS and CTOS records and other tips to get that home loan, we spoke to Andrew Hooi, the founder of Smart Choice Solution Sdn Bhd, a mortgage consultancy company based in Damansara Intan, Petaling Jaya.
Poor financial management can lead to debts. Spending more than you can afford or not being up to date with your payments can lead to a bad credit history on CCRIS and CTOS and you could end up being blacklisted by banks.
According to Hooi, here are the top 5 reasons why Malaysians have a bad credit record:
Most people will have credit card bills and loan repayments to make. While we occasionally do miss a payment or two because we are busy or we just simply forgot about it, continually missing payments will result in a bad credit record.
Late payments will show on your CCRIS report because Bank Negara collates your borrowing and repayment history from participating banks.
Most people would take out a loan at some point in their lives to buy a house, buy a car or even start a business. Then there are credit cards, which could lead to people spending more than they can afford. Those who are not able to repay these loans and debts could end up being declared bankrupt.
Bank Negara set up the Credit Counselling and Debt Management Agency, or Agensi Kaunselling dan Pengurusan Kredit (AKPK), to help people manage their debts. One of the ways to do this is to restructure the loans, making it easier for people to make repayments.
If you went through AKPK for loan restructuring, it will negatively affect your credit score.
If you have defaulted on a loan for more than 90 days, it is considered a non-performing loan. Banks will then put these loans under “special attention account”, which means that they are monitoring this account and trying to recover loan.
Once your loan has been put on this special attention account, it will show up on your CCRIS record and banks will not view it favourably when you are applying for your next home loan.
If a bank, financial institution or any other creditor (for example a company or a landlord) decides to take legal action against you to recover the money you owed them, it will show up in your credit history.
A person is declared a bankrupt by the courts when he or she is unable to settle debts. A debtor can voluntarily declare himself or herself a bankrupt or a creditor can commence bankruptcy proceedings against a debtor owing more than RM100,000.
Any legal cases against you or a declaration of bankruptcy will show up on your CCRIS and CTOS reports.
Debts are not limited to those that you owe financial institutions. Some companies that provide services such as telecommunications and utilities will report to CTOS if you fail to pay your bills.
For example, if you defaulted on the payments of your Telekom, Tenaga Nasional or Astro bills, they can list you under a trade reference to CTOS.
Details such as how much you owe and for how long this amount is owed will be sent to CTOS. This will remain in your record until the outstanding debt has been settled. Trade referees must delist your information within three working days of full settlement.
Those who have been blacklisted due to a bad credit score would probably be wondering how they can clear their CCRIS and CTOS records and blacklist.
“A poor credit history will most likely lead to banks rejecting your home loan application. If your application is rejected by a bank, this rejection record will remain in the bank internally for at least 6 to 12 months and you are most likely not going to be able to get a loan from the same bank during this period. This will affect your plan to buy a property,” said Hooi, who has 21 years of experience in the loan industry and set up Smart Choice Solution Sdn Bhd 10 years ago with his wife Jasmine Khor.
He said it is crucial for homebuyers with poor credit record to fix their bad credit record before applying for a home loan.
“My advice is for these people with bad credit records to check their CCRIS and CTOS records to know what their current financial status is and come up with a plan to clear their outstanding debts. By doing this, they can improve their credit score on CCRIS and CTOS,” he said.
Hooi provides 4 tips to improve your chances of getting your home loan approved and buying your dream house.
The overdue records will stay in your CCRIS record for 12 months and in CTOS for 24 months. That’s how long it takes to clear your CCRIS and CTOS records.
If you cannot fully settle the facility, you need to at least clear all overdue amounts and maintain a prompt payment record in a row for 12 months for CCRIS or 24 months for CTOS in order to remove the arrear records.
“If a customer manages to fully settle and get rid of their bad CCRIS record facilities with the bank, they can resubmit their loan application after the record is updated in the CCRIS system,” said Hooi.
It is also important to note that if you had a court summon, you will need to wait for two years even if you have fully settled the summon because a court summon record will stay in CTOS for two years.
If you own a property and are facing difficulties in serving the property loan, you can consider selling the property to reduce existing commitments. This will also give you extra cash at hand to settle other debts.
“If a family member is willing to help, you can temporarily sell the property to your family member. You can then buy back the property once all the debts have been paid off and you have a better credit record,” advised Hooi.
If you own a property and the property’s value has increased, you can refinance the existing home loan so that you have extra cash at hand to settle the facilities with bad credit records.
You can also pledge the property as collateral to secure a crowdfunding loan to pay off the existing debts.
Hooi advised those with a bad credit record to consult a mortgage advisor instead of applying for a home loan directly from banks.
“Every bank has its own preferred customer segment and risk level requirement. Therefore, it is best to consult a mortgage advisor to understand your current financial status before submitting any new loan application. This will give you a higher chance of getting the loan approved,” he said.
In conclusion, most loan applications are highly reliant on the result of an applicant’s CCRIS and CTOS report.
Borrowers are advised to perform their CCRIS and CTOS checking from time to time to know more details about their current financial status if they are considering a home loan.