What is a Credit Score?
A credit score is how financial institutions rate your trustworthiness in order for them to decide whether or not to lend you money. There are several factors that go into determining your credit score such as the different amounts and types of loans you take on, how you utilize these loans, how well you’ve been managing your level of borrowings and your payment history. Your credit score is reflected in your credit report which is kept by Bank Negara Malaysia’s Credit Bureau. As of today, the borrowing details of about 9 million Malaysians are reported to the Credit Bureau and is updated daily by financial institutions through CCRIS (Central Credit Reference Information System).
How May I Know My Credit Score?
Your credit report can easily be obtained by presenting your NRIC at Bank Negara Malaysia’s headquarters and filling out forms at no cost. Bank Negara will only release your credit report to you. You are not able to request the credit report of others even if it is of the person you are to be the guarantor for. Revising your credit report is also advisable as there is a chance of human error in regards to updating your borrowing details through CCRIS.
Why Is A Good Credit Score Important?
To your bank, your credit score tells everything they need to know about you. Your credit report includes all of your basic details (name, IC, address, etc.) and a comprehensive record of your financial history. It records the date you open your first bank account, entire credit card history, every loan you’ve applied for, even tracking which ones were approved and denied.
From this report, financial institutions will decide how much they are willing to lend you, interest rate, repayment period and methods, or whether they’re willing to lend you money at all. This becomes important for things such as when you want to buy that car or take up the mortgage for a home. Being given low interest rates due a good credit score can save you a lot of money in your future.
Every bank in Malaysia has access to Bank Negara’s Central Credit Reference Information System (CCRIS). Information is current and updated almost instantly, meaning if you are denied a loan by one bank today, the other banks will already have this information when you try to approach them tomorrow.
How Can I Improve My Credit Score
Your payment track record is the most significant factor affecting your credit score. So paying in full and on time is the best way to improve your credit score. Having a long credit history also increases your trustworthiness. This tells the banks that you’re tested and proven, meaning for first time loan applicants, banks may not be as lenient in regards to your repayment plan and will be hesitant in giving you large amounts of credit. How well you manage and utilize credit provided to you also plays a role in determining your credit score. Maintaining a low balance or minimizing spending on your credit cards shows that you are responsible, thus, improving your credit score. Diversifying your credit portfolio by taking on different types of loans such as personal loans, car loans and housing loans, also paints a picture of someone who is able to manage their finances well. Of course, this is only if you maintain a good payment track record.
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