When you need an extra boost in your cash flow, one of the most popular options is getting a personal loan or a personal line of credit. Unlike a personal loan where you borrow money at a fixed amount, a personal line of credit allows you to withdraw money whenever you need it. The DBS Cashline is a great choice for your short-term borrowing needs.
But what if your DBS Cashline application gets rejected?
There are various reasons why your application may be rejected. For one, your annual income may not meet the eligibility requirements. Or maybe your name or address does not match your identification documents. Another reason why financial institutions reject applications is because of the applicant’s bad credit score.
6 Reasons Your Application Got Rejected
Multiple Credit Card Application
Credit cards not only offer a buy-now-pay-later option, but it also helps you earn rewards, cashbacks, or miles. Once you learn how to maximize its rewards and perks, it’s only natural to start applying for multiple credit cards.
However, multiple credit card applications can lead to a higher risk of rejection. Each time you apply for credit cards or personal loans, the banks will check your creditworthiness by sending an enquiry to the credit bureau. Multiple enquiries, especially within a short period can affect your credit score.
Although this effect is not permanent, it’s still a good idea to keep your number of applications low. Focus on applying to a financial institution that offers the best credit card deal based on your spending habits and lifestyle.
Low Credit Score
A credit score plays an important role when you are planning to apply for a credit card, personal loan, education loan, and other forms of credit.
But what is a credit score?
A credit score is a four-digit number based on your credit history. It indicates how likely you are to default on your loan. A high credit score is favorable while a low credit score suggests that you have a higher risk of defaulting on a payment.
A low credit score may mean that:
- You pay your loan obligations late
- You disregard due dates
- Repeatedly max out your credit limits
So to avoid getting rejected, you need to improve your credit score in Singapore. Here are a few tips:
- Pay your bills on time all the time
- Keep at least one credit card active
- Avoid applying for multiple credit cards and loan facilities within a short period.
Low or Variable Income
Before you send your credit card or loan application, make sure to check the financial institution’s eligibility criteria.
For DBS Cashline, you need to be a Singaporean Citizen or Singapore Permanent Resident. You must be at least 21 to 70 years old. You must also meet the minimum annual income requirement of S$20,000 to qualify.
Financial institutions will send a rejection letter to applicants who don’t satisfy the minimum salary requirements. Plus, applicants will also be asked to submit proof of income, such as a certificate of employment and payslips.
Financial institutions may also take into account your employment status and how you earn your income. That said, applicants with a steady income are more favorable.
If you’re self-employed, a freelancer, or a commission-based employee, you may need to prove your financial stability. This means producing additional documents to prove your income history to be approved. That said, having an unstable income may be a risk factor and a reason for card or loan rejection.
Insufficient Employment History
As previously stated, financial institutions prefer applicants with a steady income. That said, you need to have a regular employment history. The number of years of employment required may vary depending on the lender.
For instance, a financial institution may want to see a full 12 months of employment history. So if you’re short of a few months, it may put your application at risk of rejection.
Aside from your credit score, financial institutions also take into account your debt-to-income ratio (DTI). This is a financial tool that calculates the relation between your debt and income.
So how do you get your DTI? Your debt-to-income ratio is found by dividing your recurring monthly debt payments and your gross monthly salary. The result will help assess your ability to pay.
Basically, a low DTI ratio, ideally less than 36%, demonstrates a good balance between debt and income. A high DTI ratio, on the other hand, may lead to a rejected personal loan application.
Total Debt Servicing Ratio
The Total Debt Servicing Ratio (TDSR) sets a limit to how much you can spend on your monthly debt repayments to 55% of your gross income. This regulation was established by the Monetary Authority of Singapore (MAS) in 2013.
The TDSR is taken into account by banks and other financial institutions when assessing:
- Housing loans
- Refinancing of housing loans
- Loans secured by a property
If your TDSR is too high, your personal loan application may be rejected. Plus, if you don’t have a steady income, only 70% of your total assessed income is counted in the TDSR.
Tips for Getting Your Credit Card Application Approved
Review Your Credit Reports
Before applying for any credit card or personal loan, get a copy of your credit report. Check for any errors on your credit report. Remember, any error may affect your credit score. If you see an error, file a dispute with the Credit Bureau to get it fixed.
Demonstrate Responsible Repayment Behavior
There are ways to improve your credit score and clean up your credit history. One way to do so is to pay your bills on time, all the time. This includes payments for credit cards, student loans, rent, utilities, and more.
Here’s a tip: Consider setting up automatic payments to avoid accidentally missing a due date.
Limit Your Requests For New Credit
Avoid applying for multiple credit cards at once. This means taking your time to find the right card that offers the best deals. You can use online comparison tools that allow you to compare financial products of different financial institutions. In doing so, you can compare different rates, terms and conditions, and other factors without having to submit multiple enquiries.
Keep at Least One Credit Card Active
Credit card utilization can help boost your credit score. However, you need to be smart about using it. Make sure to keep your credit card balances low. Consider paying off purchases in full by the due date. Or pay off outstanding debt more than once a month to keep your balance lower throughout the month.
Improve Your Total Debt Servicing Ratio & Debt-to-Income Ratio
- Pay off your loans or outstanding credit card debt before the due date. You can do so by increasing the amount you pay monthly toward your debt.
- Target the debt with the highest “bill-to-balance” ratio. This means paying off the debt that requires higher monthly payments.
- Avoid taking on more debt. Consider reducing the amount you charge on your credit cards.
- Try negotiating a higher salary. You can lower your DTI ratio by increasing your income. That said, if you can ask your employee for a raise, then go for it.
- Earn extra income with a side hustle. If asking for a raise doesn’t work, then consider taking on a side hustle, such as renting out a room or driving for Grab.
Don’t forget to recalculate your debt-to-income ratio and total debt servicing ratio to see if you’re making a difference.
Credit card or personal loan application, such as DBS Cashline may be fast and easy for some. However, for others, it may be quite challenging. If you think you’ve done everything right and your application is still rejected, you can call the financial institution and ask for reconsideration.
- A credit score plays an important role in your credit or loan application. A low credit score means a higher risk of rejection.
- Financial institutions also take into account your debt-to-income ratio (DTI). A low DTI ratio, ideally less than 36%, demonstrates a good balance between debt and income.
- The Total Debt Servicing Ratio (TDSR) sets a limit to how much you can spend on your monthly debt repayments to 55% of your gross income. A high TDSR may lead to a declined application.
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