With effect from 1 December 2013
Financial Institutions (FIs) to conduct credit bureau and income checks before increasing credit limits.
Why must another credit bureau and income check be conducted before a borrower’s credit limit can be increased? Have these checks not already been conducted when the borrower first applied for his credit card or unsecured credit facility?
A borrower’s income and overall indebtedness may have changed since he first applied for the credit card or unsecured credit facility. Thus, the FI should conduct a fresh credit assessment before increasing the borrower’s credit limit. The income and credit bureau checks will aid the FI in this assessment. The documents used for the income checks must not be dated more than 3 months prior to the request for an increase.
If the FI finds that the borrower’s income has fallen and/or his credit-worthiness has deteriorated since the credit card or unsecured credit facility was issued or granted, the FI may choose to decline his application for a credit limit increase and reassess the borrower’s existing credit limits.²
² Where the income check reveals that the borrower’s income has fallen such that he no longer qualifies for the credit limit granted to him, the FI is required to reduce the credit limit granted such that the revised credit limit is within the regulatory limit of not more than (i) 4 months’ income for a borrower with an annual income of at least S$30,000 but less than S$120,000; and (ii) 2 months’ income for a borrower with an annual income of less than S$30,000. In addition, the FI should not extend further credit until the borrower’s total outstanding unsecured amount falls below the regulatory credit limit.