The topic of late that seems to be a favourite among my group of friends is: credit score. Some of them have an idea of what this means, but surprisingly most of them have zero knowledge on this matter.
So what is credit score? In general, your credit score reflects your credit worthiness to banks. The reports generated from your credit score will show the last 12 months of missing payments, financial commitments and it can even tell if you’re paying your credit cards or loans on time. If your credit score shows a healthy report, your chances of approved loans or credit card applications are higher.
In Malaysia, one of the main source for you to get your credit score is via the Central Credit Reference Information System (CCRIS). Walk into any Bank Negara Malaysia (BNM) and you can request for a free copy of your credit report generated from CCRIS.
Another way to obtain your credit score that’s widely used in Malaysia is through the Credit Tip Off Service (CTOS). CTOS is a private company that provides credit reporting. It is widely used by financial institutions to determine a person’s creditworthiness. CTOS collects credit related information from various public sources such as The Insolvency Department of Malaysia, The Companies Commission of Malaysia and publications of legal proceedings and notices in newspapers and government gazettes.
If you’re keen on improving your credit score or even maintaining a positive one, here’s the Do’s and Don’ts you need to know:
Do – Check your credit report from time to time
Your score changes on a monthly basis. One of the ways for you to keep track of your financial well-being is to be aware of your credit report. Who knows, there might be late payments on your records that you don’t know of.
Don’t – Change your Malaysian Identity Card (NRIC) too many times
Every time you replace your NRIC, a number at the back of your card has indication of how many replacements you’ve had. This will hurt your credit score as banks will view you as a person of high risk when it comes to fraud.
Do – Build a credit history
If you’re one of those rare people who has no credit history at all, don’t be too quick to cheer! Having zero credit history is as bad as having a poor credit score. You may be very good at managing your financial well-being, but having no credit score means banks won’t be able to have a record of your past repayment behaviour. This can easily be remedied by applying a credit card. But of course, keep in mind not to go crazy and splurge on yourself!
Don’t – Be late for payments
Your payment history is very important as this will show how trustworthy you are with your monthly payments and debt repayments. Therefore, it is best to clear your outstanding debts promptly especially your PTPTN loans.
Do – Check your financial relationships
Having a shared financial relationship can have a toxic effect to your financial status. For example, you may have agreed to take up a loan on behalf of your relative, spouse or even be a guarantor for a loan for them. The problem starts when there’s a delay of repayment. When it comes to being a guarantor, you will be responsible for the payment history and debts hence affecting your credit score. Keep your finances separate from others including your family so that you will be in control of your credit score.
Don’t – Have or apply too many credit cards
The general rule is to have 3 different credit cards from 3 different banks. More than that, you will be considered as a risk to the banks. It is also good to take note of your credit card utilization. Do not spend more than 70% of your combined credit card limit. Anything beyond that will definitely hurt your credit score.
Have you taken a peek at your credit report? How do you maintain a healthy credit score? Drop us a comment below!