Why loan applications get declined, and what the report shows

What a bank checks, and where it shows

A bank weighs the credit report together with the application, the payslips and its own policy. Bank Negara says CCRIS is only part of each lender's decision, and that the report gives facts, not an opinion. So the same file can be approved at one bank and declined at another.

The reasons that show on the report

Repayments too high. Bank Negara's guidance asks banks to assess affordability on a prudent DSR, so a customer with a spotless record can still be declined because the monthly budget is full. The DSR guide explains the sum.

Late payments. CCRIS counts the instalments in arrears for each of the last 12 months. Bank Negara says that when arrears are settled, the account is shown as regularised in the month of settlement, but the arrears count for the earlier months stays in the report. How a lender treats one late month compared with three is the lender's own rule.

Special attention, legal action or bankruptcy. A special attention account is a loan the lender has put under close watch because it is impaired or being collected on. CTOS shows legal cases for up to two years, and a bankruptcy record until two years after full settlement.

Too many applications close together. CTOS says several applications in a short period can suggest someone is under financial pressure or taking on debt faster than they can manage. It also lists too many recent enquiries as a factor that can lower the score.

Restructured loans. A facility that has been rescheduled, restructured or placed under an AKPK repayment programme carries a status on the CCRIS report, and a lender will see it.

The reasons that do not show on a credit report

Some declines have nothing to do with the report. The bank may not accept the income as stated, for example because commission is counted at a lower figure or the payslips and the application disagree. The name, address or employer may not match between documents. The property or vehicle may be valued below what the customer expected, or the loan may fall outside the bank's appetite for that type of borrower.

Bank Negara says different institutions have different lending policies depending on their risk appetite. The Registrar Office of Credit Reporting Agencies puts it more bluntly: a credit report is lead information, and the final decision lies entirely with the financial institution.

How to find the real reason

1. 1

   Ask the bank for the reason

   A bank may not give every detail. But if a lender rejects an application because of a credit report, the Credit Reporting Agencies Act gives the customer the right to be told which agency's report was used, and to see that report.

2. 2

   Pull the same report

   A CCRIS report is free through eCCRIS. The full CTOS and Experian reports, the ones with the CCRIS records and a score, cost a fee. Compare it line by line with what the customer told you.

3. 3

   Check for errors

   Look for a payment marked late that was paid, an account that is not theirs, or a wrong name or ID. A wrong facility record is corrected by the lender that reported it, so take it to the lender. Bank Negara says a lender can take up to 14 working days to reply, and its FAQ says the eCCRIS route for sending account disputes to lenders was temporarily unavailable, so contact the lender directly.

4. 4

   Fix what is real

   Settle arrears, clear the debts that cost most each month, and wait for the next CCRIS update. Lenders update it by the 10th of the following month.

5. 5

   Then choose where to apply

   One decline does not mean every bank will decline. Choose the next lender on its policy for this customer, not at random.

When to wait, and when to apply again

Applying again straight away to another lender with the same file adds another search to the record. CTOS says submitting another application without dealing with the underlying issue is unlikely to produce a different result, and advises understanding why before reapplying.

• If the cause is DSR, the fix can be as quick as clearing one debt. Allow a month for CCRIS to show it.
• If the cause is a late payment, the month stays in the 12-month grid. Wait, and keep paying on time.
• If the cause is a legal case or special attention account, speak to the lender or the court first. Applying elsewhere will not change it.
• If the debts are already out of hand, AKPK is the agency Bank Negara set up for credit counselling and debt restructuring. CTOS says its counselling is free.

The CTOS analyzer on our homepage can list the facilities and the DSR from a CTOS, eCCRIS or Experian report in your browser, and flags late payments on CTOS reports. Use it to find the likely cause before anyone applies a second time.