There are several things that affect the rejection of loan applications, both at banks and other financial institutions. Before making a loan, make sure you have a good credit score. The credit score itself is a measure of whether a person's loan application deserves to be accepted or rejected. The lower the credit score, the higher the risk that the person will default.
Then, is there a way to improve credit scores? Here, the BFI Finance team provides ways that you can apply to increase your credit score.
What is Credit Score
A credit score is a scoring system used to determine the feasibility of whether a prospective debtor can be given credit facilities or not. A valid credit score can be accessed through the OJK SLIK service. Later, the debtor will get one of five credit scores based on his financial transaction history. If the debtor has a bad credit score, it is likely that the loan or credit application will be rejected by the creditor. On the other hand, if the debtor has a good credit score, there is a high chance that the credit application or loan can be accepted.
Having a bad credit score certainly causes more losses for the debtor. Don't worry though, a bad credit score can be corrected by adopting healthy financial habits.
Credit Score Classification
The classification or credit score level is divided into 5 in accordance with the Financial Services Authority Regulation Number 40/POJK.03/2019. The five levels of credit scores are:
1. Credit Score 1: Current Collectability.
The debtor has a credit score of 1 if the principal and interest payments are always paid on time.
2. Credit score 2: Collectability in Special Mention (TPF)
The debtor has a credit score of 2 if the principal and interest payments are delayed from 1 to 90 days from maturity.
3. Credit score 3: Substandard Collateability
The debtor has a credit score of 3 if the principal and interest payments are late in payment 91 to 120 days from maturity.
4. Credit score 4: Doubtful collectability
Debtors have a credit score of 4 if the principal and interest payments are delayed by 121 to 180 days from maturity.
5. Credit score 5: Bad Collectability
A debtor has a credit score of 5 if the principal and interest payments are delayed by more than 180 days from maturity.
How to Increase Credit Score
Use Credit Card
Using a credit card can be one way to increase a person's credit score. By having a credit card, you will have a credit history. From this history, financial institutions such as banks or financial institutions can see the profile of the existing risks. So, make sure you understand how to use a credit card wisely and pay it on time.
Make Sure the Credit Card Remains Active
If you have multiple credit cards, make sure the unused credit cards are still active. According to experts, one way global companies assess customer credit is by looking at the number of active credit cards. But provided that the unused credit card has a good payment history.
Pay Credit Card Installments in Full
Even though the Bank offers a minimum installment payment, try to make a full credit card installment payment. This aims to avoid debt that accumulates and defaults. The more debt that has not been paid, of course, will add to the burden of even greater interest rates. If you experience a late payment, in addition to worsening your credit score, a late payment penalty will come to you.
Healthy Debt
Having healthy debt is also an assessment of one's credit. A person can be said to have healthy debt as long as it does not exceed 30% of monthly income. This number is a safe number that can assess a person's eligibility to apply for a loan. In addition, the amount of debt owed by the debtor can be used as an instrument for calculating the debt service ratio or the ratio of debt to income that you receive each month.
Paying Bills On Time
If you have debt, it should be paid. By paying on time, your credit score can improve or have a good score. There are several ways that you can pay your bills on time as follows:
- Set a reminder
- Set aside money to pay off debt at the beginning of the month
- Separate accounts payable finance with other items
Credit Restructuring
If you are facing bad credit conditions or are experiencing financial difficulties, it's a good idea to apply for credit restructuring. Credit restructuring aims to ease debtor installment payments under certain conditions. Not all credit restructuring applications will be accepted by creditors. In this case, the creditor needs to do a feasibility analysis whether you really need the service.
There are at least 6 ways to restructure credit, but the most common are the following 3 ways:
1. Rescheduling
The rescheduling method is a method of transferring debt payments to certain debtors by changing the tenor or period of debt payment. For example, a debtor with an initial tenor of 36 months, using the rescheduling method, will change the tenor to a tenor of 48 months.
2. Reconditioning
Meanwhile, the restructuring method is a method of transferring debt to debtors under certain conditions by changing part or all of the terms of the credit agreement. Changes to this credit agreement can be in the form of changes to the interest rate charged, the tenor, or a reduction in the principal of the loan.
3. Restructuring
Furthermore, the restructuring method is a method of transferring the debtor's debt with certain conditions by changing the credit terms which include changes in the principal amount of the debt and additional funds.
Well, those are the ways that you can do so that your application is accepted or not rejected by increasing your credit score. With a good credit score, you can easily apply for a loan at BFI Finance. In addition to being a safe and reliable financing company, BFI Finance already has around 300 branch offices and outlets spread throughout Indonesia. So what are you waiting for? Come on, apply for a loan for all your needs at BFI Finance.
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