How to lower your DSR before you apply

Two levers, and only two

DSR is monthly commitments divided by monthly income, so only the top or the bottom of the sum can move. Everything below works on one of them. Work on the top first, because it is usually faster and needs no new paperwork.

Lever one: clear the right debts, in the right order

Not every ringgit paid off does the same work. A term loan has a fixed instalment, so a part payment often leaves the instalment as it was and shortens the term instead. Ask the bank before you count on it. The instalment disappears when the loan is cleared in full.

A credit card is different, because its minimum payment follows the balance. Bank Negara requires card issuers to ask for at least 5% of the outstanding balance, plus the instalments on any easy payment plan on the card. So on a card with no plans, every RM 1,000 you pay down takes about RM 50 off the monthly figure, even if the card is not cleared.

To rank your debts, divide each monthly instalment by the balance still owed. The highest ratio frees the most monthly cash for each ringgit spent clearing it. A buy now pay later plan with a few months left, or a car loan near its end, can beat a large housing loan by a wide margin.

Lever one, continued: stop new commitments arriving

Every new instalment raises the top line, and some are easy to forget. CIMB suggests holding off on buy now pay later plans and new car instalments for three to six months before a major application. PIDM reminds borrowers that non-bank instalments count too, such as AEON Credit or Courts FlexiPlan, and so do PTPTN loans.

Look at the customer's reports for small plans they have forgotten, and ask about koperasi deductions that CCRIS does not show. A bank that finds a commitment the customer did not declare may count it anyway, and the mismatch can cost more than the commitment.

Cards are worth a question. Clearing a balance lowers the minimum payment. Whether closing a card, or cutting its limit, helps as well depends on whether the bank counts a card by its limit. Ask the bank before you cancel anything, because CTOS also notes that closing old accounts can shorten a credit history.

Lever two: income the bank can count

Bank Negara's guidance on responsible financing asks lenders to look at income after statutory deductions, and a bank can only count income it can verify. For a salaried customer that means payslips and bank statements that agree. For a self-employed customer, PIDM suggests keeping steady proof of income, such as bank statements or invoices showing money coming in every month, and proof of repayments to lenders outside the banks, including koperasi.

Commission, bonus and allowances are often counted differently from basic salary, for example averaged over several months or at a percentage. Ask how the bank treats each one and how many months of history it wants.

A joint application adds a second income, but the bank will usually look at the second person's debts as well. It only helps if their own commitments leave room.

Time it around the CCRIS update

Bank Negara says a lender updates a settled loan by the 10th of the following month. It also says the 12-month arrears record stays in the report after arrears are settled. So a debt paid off today can still sit in a bank's view for weeks. Applying the day after you clear a card often means the bank still sees the card.

1. 1

   List every commitment

   Use the CCRIS record, then add the debts it does not show, such as koperasi deductions and some instalment plans.

2. 2

   Work out the DSR the bank's way

   Ask whether the bank uses net or gross income, and how it counts cards and joint loans.

3. 3

   Rank the debts and clear the best ones in full

   Instalment divided by balance, highest first. Keep the receipts.

4. 4

   Get a settlement letter

   The Registrar Office of Credit Reporting Agencies says a customer should get a settlement letter from the lender and take it to the bureau if a settled loan still shows.

5. 5

   Wait for the next CCRIS update

   Then pull a fresh report and confirm the debt has gone before anyone applies.

6. 6

   Apply to one lender at a time

   Each application is a search that other lenders can see.

What not to do

• Do not overstate income. The documents must agree with the application. A mismatch costs more than a lower figure.
• Do not take a new loan to clear old ones without working out the effect. Consolidating can lower the monthly figure, but it is a new loan with its own cost, and it needs its own sum.
• Do not pay anyone to clean a credit record. Only the lender that reported an entry can correct it.
• Do not stop paying a debt on time while you wait. A late month is a new problem that stays in the 12-month grid.

The CTOS analyzer on our homepage lets you tick the debts to settle and shows the DSR before and after. It works on the gross income you type, so confirm the result with the bank's own method.