Many worry that bad credit will prevent them from obtaining a home loan. While it’s true that banks offer lower interest rates to people with a history of paying bills on time, there are options in Thailand for individuals with weak credit.
What is “bad” credit and how to fix it
Don’t worry. Like many things in life, your credit standing with the bank is dynamic and can be changed or improved by following the right steps. Because you will likely be paying your home loan every month for 10 to 30 years, it’s important that you take the right steps to reduce your interest rate as much as possible before borrowing. It’s in your best interests to take clear efforts toward improving your credit – it could save you hundreds of thousands of baht – the price of a car – over the course of your loan.
There are volumes of complicated literature online about how a credit score is calculated. It’s not that hard. How banks judge your credit worthiness (and interest rate) is fundamentally simple. How much debt do you have? To how many different people (banks, merchants, …) do you owe money? Do you pay them on time?
How banks think about your credit worthiness is not different than if a coworker asked you to borrow 10,000 baht. You would ask: Will they use my money for their stated purpose? Does this person owe other people money? Do they have a history of paying people back when they say the will? Does this person have the ability to pay me back?
To improve your credit worthiness from the banks, just ask: Would you lend money to you? If there is any hesitation, think about the specific financial behaviors that would lead you to conclude “no” and fix them. Work toward paying off credit card debts. Make payments on time. Make lifestyle sacrifices in order to pay off high interest debt and work as much as possible to getting toward even. In addition there are other behaviors which you should make note of:
- Do not suddenly close an account to remove it from your credit history – it doesn’t work and banks will find out anyway
- Do not rapidly open many different credit cards or other credit lines in a short period of time
- Do not apply for too many home loan lines of credit over a long period of time. Every time that you apply for credit, lenders look at your credit history, and this will negatively affect your credit as it looks as though many people are denying you for credit. If you coworker asks you for money, but you heard that 10 other people in the office said “no” already, you might not be so keen to lend…
Why do customers get turned down?
If you’ve taken efforts to improve your credit worthiness and still don’t get accepted from the bank, it may be due to other factors. Based on the Masii.com team’s knowledge, we see the following key reasons as affecting approval:
- Asking for too much money. Bank not confident that you can afford to pay it back over an extended period
- Failure to pay a previous loan. Bank sees that in recent years you didn’t pay back another loan. This can seriously affect their willingness to trust you. Talk to the loan officer for more detail
- Too much money on your credit cards. If you are consistently charging more money than your credit limit, or are only making minimum payments toward the balance, lenders see red flags
- Bankruptcy. Filing for bankruptcy in the past few years will severely affect your ability to get a home loan
Don’t fret. Credit is dynamic and doesn’t last forever. There are serious measure you can take to improve your likelihood of approval, and for more information call and talk to one of the experts at Masii.com