Your credit score is your ticket to financial health, and in Malaysia, it’s paramount to establish or improve it. An excellent credit score gets you the best terms when applying for credit cards or loans. Establishing and improving your credit score is important because it will give you better deals when applying for credit cards or loans. A high score indicates your ability to use credit sensibly! Here’s how to begin.
Understanding the Main Factors That Affect Your Credit Score
If you want to boost your credit score, it’s also important to learn how it’s calculated. In Malaysia, your score is based on information in the Central Credit Reference Information System (CCRIS) operated by Bank Negara Malaysia, and assessed by credit reporting agencies like CTOS and Experian. While the agencies may use slightly different scoring methods, the key factors that influence your credit score remain the same.
Payment History and Its Impact on Your Score
Your payment history is the most important portion of your credit report, clearly reflecting to lenders how reliably you pay your bills, loans and credit card balances. Late payment history, defaults and bankruptcies will have a damaging effect on your score and the more consistent you are with on-time payments, the higher your score will be.
For example: Always paying your bill on time every month helps your score. One missed payment negates that.
Credit Utilisation: How Much Of Your Credit Limits You Use
Credit utilisation is the amount of available credit that you’re actually using. Creditors prefer to see that you’ve only used a small level of your available credit, by that being a sign of responsible financial management. As a rule of thumb, keep your credit utilisation ratio below 30% of your total limit overall onto all of your accounts and credit cards.
Tip: If you have a credit card with a limit of RM10,000, try to ensure your utilization never exceeds RM3,000. This one thing will help you retain a higher score.
Length of Your Credit History: Why It’s Important
The length of your credit history influences your score to the extent that it demonstrates how long you have been “in the game.” Lenders generally prefer to lend their money to borrowers with demonstrated credit behavior, so if you have an open credit account that has been in place for many years, it indicates credit responsibility for a longer period of time, and that helps your score.
For example: If you have had your credit card for five years and you have made payments on time throughout that period, your score will benefit from that history—even if you hardly use it.
Ways to Increase Your Score Fast
While improving your credit score can take time, there are quick actions you can take to see positive results in a relatively short period.
Paying Off Outstanding Debts and Overdue Accounts
Taking care of any outstanding debts or unpaid accounts is one way to boost your score. The impact of late payments may linger on your credit reports for a time, but settling past-due accounts indicates to lenders that you’re responsible for your debts.
Tip: Start by clearing debts that attract the highest interest rates so you can save on what you owe, improve your score and decrease how much you’re having to find each month.
One of the quickest methods of improving your score is to reduce your credit utilisation ratio. Keeping your usage proportion of your total available limit under 30%, as stated above, shows lenders you handle your money sensibly.
Actionable Step: If you have high balances on multiple cards, pay them down and stay well below the limit – or preferably, don't max out any card. This will instantly lower your credit utilisation and boost your score.
People starting to build credit or with a limited credit history may not have a great starting score, but it is possible to build it from the ground up.
If you have no credit history, consider applying for a secured credit card. These cards require you to put down a cash deposit as collateral, reducing the bank’s risk. A secured card will help you begin building a positive payment history, which will gradually help raise your score.
Tip: Many banks offer entry-level credit cards with low income requirements, making them ideal for beginners looking to establish credit.
Taking Small Loans and Repaying Diligently
Another means of proactively working on your credit file is to take out a very small loan. This could be an unsecured personal loan or even hire purchase for a motorcycle or furniture, for example. The essential thing is to make payments regularly and on time, thus creating a good payment history on your file.
Example: If you have a student loan, ensure you make consistent payments. Even small amounts add up over time and positively affect your score.
Applying for a Secured or Entry-Level Credit Card
Additionally, if you’re just starting out in building credit, or earn a lower income, you might seek out a secured card or a beginner’s credit card. Secured cards require a deposit that equals your credit limit. Because of that, they are typically low-risk options for the lender and are often designed for those with limited or no credit history and therefore income requirements are often lower as well.
Tip: Always pay your balance in full each month to avoid high interest charges, and always make all your payments on time to build a great credit history.
Why should you check your credit report regularly?
For starters, you want to know what your score is, but more importantly, you want to know if there are any errors—like fraud, for instance—that could negatively affect it.
In Malaysia, you can check your credit report (in particular, eCCRIS) for free through Bank Negara Malaysia’s eCCRIS portal, or you can request one from agencies such as CTOS and Experian (paying a fee). Being aware means you can react quickly if you notice something hurting your score.
Action Tip: Make a note to revisit your credit report at least every few months.
Mistakes That Hurt Your Score
Raising your score is a marathon, and there are plenty of ways to run afoul and lose all that forward momentum. Avoid these:
Applying for Too Many Credit Cards in a Short Period
Every time you apply for a new credit card or loan, lenders perform a “hard inquiry” on your credit report. One or two of these won’t make much difference, but several in a short period of time may be interpreted as a sign of financial instability, harming your score.
Tip: Only apply for credit when necessary, and space out applications over several months to avoid damaging your score.
Missed Payments
Even one missed payment can ding your credit score. To avoid it, use reminders or automatic payments to ensure you never miss a due date. The more payments you make on-time, the higher your score will be.
Using Instant Loans Wisely
Instant loans may have an instant appeal, but they can come with high interest rates and impact your score negatively if not paid. Use instant loans to bridge short-term needs, but ensure that you can pay them back and have room in your budget first. Applications for too many loans in a short time can also lower your score through hard inquiries.
Changing your credit score can take time. But with proper techniques you can help improve your credit score even in a month or two. It does not matter even if you have zero score to start with, keep practicing all these tips and you will find better financing opportunities in Malaysia.
FAQ
How is my credit score calculated in Malaysia?
Your credit report in Malaysia is based on your payment history, credit utilisation, and the length of time you have been using credit. In Malaysia, it is produced by credit reporting agencies like CTOS and Experian, using data from Bank Negara Malaysia’s Central Credit Reference Information System (CCRIS).
What affects your credit score?
What affects your credit score depends on many different factors. “By far, the most important factor in calculating your credit score is your history of on-time payment and the proportion of your credit limits you’re using,” says Leslie Tayne, founder and managing director of Tayne Law Group. “Paying your loans and bills on time each month will inflate your score, while a late payment, defaulting or bankruptcy will lower it. “Trying to improve your score quickly is sometimes ideal but it may not always be possible,” she says. “If you have outstanding debt and you can pay that down, this has the potential to inflate your score almost immediately.”
What should I avoid to keep my score safe?
Applying for too many credit cards in a short period of time, missing payments, and maxing out your credit. Make sure you can pay back any loans or credit balances you’re considering taking on.