4 Times A Bad Credit Report Can Absolutely Destroy You

bad credit report


Your credit report plays a pivotal role in your financial journey. And as far as reports go, it is one of the most important ones that will be attached to your name.

The scary thing is, you might not even be aware of how much of a mess it could make of your life and your finances, until it is too late!

Here are 4 times a bad credit report can put you in a tight spot and even cost you money in the long run!


1. When you apply for loans

The simple fact of the matter is, in most situations, your credit report is a deciding factor in whether you’ll be approved for a mortgage,car loanor any other types of loan.

The thing with credit report is, it doesn’t just show the lenders your payment history, it also tells them how much credit you have on your name and how much you have used up. If your credit is maxed out, the likelihood of you getting a loan can be slim.

Banks lend you money to make money, hence they only lend to those who can pay them back. If your credit report indicates that you are an unreliable borrower, you might not be able to obtain the credit that you need.

Even if you do get approved for your application, you could be offered a lower margin of finance and/or with higher interest rates that could come up to thousands of Ringgit more over time!

Avoid paying more by improving your credit health, so you can qualify for the best loan terms and rates.


2. When you apply for credit cards

As with any loan, applying for a credit card involves a thorough credit check and this can be challenging if your credit report is less than stellar.

Worse, a failed application will show on your records and this will further hurt your chances of getting approved for another credit card, at least for the next 12 months.

Activities that can hurt your chances of getting approved for that spanking new piece of plastic include frequent late payments for your other cards or loans, and high debt-to-income ratio exceeding 60%.

If you haven’t been on your best financial behaviour, the best thing you can do is to first clean up your credit report before applying for a new credit card.


3. When you apply for a job

Here’s more bad news – a bad credit record can even affect your chances of getting employed!

If you have skeletons in your financial closet – say bankruptcy, delinquencies or a proclivity for racking up huge debts – then applying for a new job can put you in a tricky spot, because an employer can easily find out all about it.

Many companies perform credit checks on potential employees as part of a background check. Some companies also perform checks on employees who are considered for promotions, especially for higher-level positions, so you can’t assume that just because you’ve been hired, your personal information will stay personal.

There are companies who conduct background checks for pre- and post-employment which include financial probity checks. This is especially common with government-linked, public-listed and multinational companies for positions that involve dealing with cash, access to corporate finance and bank accounts, access to client accounts and data, handling financial data, or involvement with financial IT software and systems.

If you have poor credit, the long-term goal should always be to get back in the black. But if you are in urgent need of a job (because how else will you clear off your debts without an income?), you can try applying with smaller companies where the hiring process isn’t standardised or have no professional human resource folks to suggest credit checks.


4. When you’re looking to rent

We already know that having bad credit can make it difficult for you to secure a home loan. But even if you’re just looking to rent, your credit history can still pose problems.

In these trying times, landlords are more concerned than ever about finding a tenant who is going to pay their rent on time, so it is not uncommon for them to vet potential renters.

They will look through your credit history to assess how much of a financial risk you might pose. If you have poor credit health, you might have a tough time securing that rental that you desire. However, this may not be common among small-time residential property owners.

In this situation, a short-term option for you is to pay a more substantial amount of deposit, which can at least guarantee the landlord your tenancy for this period. In the long run, you will need to reassess your finances and work on improving your rating.

How to fix a bad credit report

Just like when your child is running a temperature, you would regularly check his/her temperature to see if he/she is recovering or deteriorating. Similarly, with your credit report, especially if you have a problem in your credit, you should regularly check it to see how well you are doing.

If you are working to build or rebuild credit, it is recommended that you check your credit report once every three months to ensure you are on the right track of recovery. Even if you have no issue with your credit, it pays to ensure your report is up-to-date and accurate by checking it before you apply for a credit facility such as a loan or a credit card, a new job, and it will also help you guard against identity theft and errors.

Checking your credit report is easy and convenient with CTOS. You can access your MyCTOS report to check if there are any red flags in the report that may impact your future credit applications. This can be done online and within three working hours.

The good news is, your credit report shows your credit history for the past 12 months.  Hence, if you want to improve your credit rating, the first thing you need to do is to make sure you make all your payments to creditors on time and also pay down your credit for the next 12 months. This includes your bills and debts.

If you’re forced to miss a payment, be sure to inform the creditor and make the payment the following month. If you have outstanding defaults, pay them off as soon as you can.

To avoid glitches in your pursuit to purchase a car or a home, you should obtain your credit report from a credit reporting agency such as CTOS to make sure that everything is up-to-date and in order before you proceed. For instance, if you have paid a debt that was subject of a court judgement, make sure it is reflected on the file.

Need help on where to start? You may engage the Credit Counselling and Debt Management Agency (AKPK) for the financial management assistance that you require.