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Your credit cards determines your housing loan


We submitted our documents for housing loan to one of the bank on the Sunday after we bought the executive condo, Lush Acres. One of the documents, the latest payslips, were submitted on the Monday as we could only get access to it in office. However, we had submitted our earlier payslips all on Sunday.

How long did the approval process take?

To our surprise, by Thursday late afternoon, in just 4 working days later, I had a call from my banker who told me that our loan was approved.

I asked her if the fact that we had an approval in principle with two other banks prior to getting our EC played a part in the fast approval. She said that it doesn’t and that all banks have different processes which does not care if other banks have or have not granted the loans in principle or otherwise.

So how does the bank determine who to loan?

One method that banks use is the Credit Bureau of Singapore(CBS). The CBS was set up by the Association of Banks in Singapore (ABS) to manage credit risk. It collates the credit cards, the loans that you have to calculate a credit score.

The scary (or wonderful, if you are the banks) part of it is that all banks return your credit history to this central repository. So if you are one of those that are slack in repaying the credit card bill and allow it to go 1 month past due, this blemish on your record is there for at least a year.

Then you are graded from HH to AA in your credit worthiness. They also even assign you a credit default risk and how likely you are to default on your loan and credit card payments.

And all the credit card applications, loan applications are logged, so that if you have many applications, it could cause your credit score to go down.

For the banks, it gives them a safer way to decide if they want to give you the credit facility, the credit card and a big sum of money for the housing loan.

Being a nosy parker, I went to check my credit worthiness a few times before, but both times it failed at processing. For some reason, today was alright and I managed to see my credit rating was a commendable AA.

I found that they even tracked if you have made full payment for the month for the past 12 cycle. And also if you have made a balance transfer of your credit balance you owe the bank to another bank or credit line.

It is just $6 and GST, which means $6.42 to check.

So that was why my banker said that some of her clients have really a lot of credit cards, so I guess for them, it takes a while for the bank to check and come up with their home loan approval.

The total personal loans/credit facility, car loans and even minimum payment for your credit card goes to the calculation for the Total Debt Servicing Ratio (TDSR) which is pegged at 60% so this determines how much the banks can lend for the housing loan.

So the more credit cards you have, the lower the bank can lend for the housing loan especially if you are also saddled with a car loan.

If you are going to apply for a housing loan or buying a house or car, it will be a good thing to check all this on your credit score before you commit yourself.

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