How to improve your credit score

KNOWING your credit score by heart is not as popular in Malaysia as it is in some other countries, but it is definitely gaining traction.

Rightfully so: knowing your credit score is the first step towards improving it, essential for getting approved for a host of personal finance products, including credit cards and personal loans.

The "holy grail" of credit reports in Malaysia is the Central Credit Reference Information System (CCRIS), created by Bank Negara Malaysia (BNM), which shows the last 12 months of outstanding loans, all your applications for personal finance products. It also shows whether you have any special payment arrangements, for example you are on a payment track with the Credit Counselling and Debt Management Agency (AKPK) to bankruptcy.

The most widely used commercial credit score in Malaysia is CTOS, which is based on the global FICO score. The score ranges between 300 and 850 and consists of five factors which weigh differently: payment history (35%), amounts owed (30%), length of credit history (15%), credit mix (10%) and new credit (10%).

A score of 718 – 850 is considered above average, 651 – 717 is fair and anything below 650 will make it either hard or almost impossible to obtain any credit from the banks.

Payment history is most important and looks as how trustworthy you were with debt repayment in the past in order to predict how you will behave in the future.

It is therefore crucial that you pay your bills on time and if you are late, you pay it as soon as possible. Three months too late is worse than a week too late.

You also don’t want any debt settlements, (car) repossessions, defaults or bankruptcies, foreclosures or legal suits in your payment history as this will spook the banks. 

Your credit score may also be affected when you are a guarantor for a loan or the principal card holder of a supplementary card, as you will be responsible for those payment histories as well.

The amount you owe is almost equally important: banks like a low utilisation of your available credit limit, which means the amount you have outstanding as a percentage of your maximum allowed credit limit. 

Banks rather see you complete the instalments on a hire-purchase loan than apply for a new one, because it shows you have been able to reliably pay the instalments. 

Once finished, your disposable income will rise and you will have more room for new debt. Having three maxed out credit cards is a major red flag. 

This also means cancelling an old credit card you no longer use might be a bad idea, as it will reduce your credit limit and therefore logically increases your utilization. Try to reduce your debt instead.

The length of your credit history also helps your credit score, another reason you may want to hold onto that old credit card. 

You may be the most financially prudent person, but you need to be able to prove that to the bank. 

The more information banks have, the more comfortable they are approving you – as long as your history doesn’t reveal any red flags. That means if you apply for a home loan, it is important the bank can verify your credit history through your payment of other financial products, such as credit cards or a car loan. 

Therefore, it makes sense to start with a credit card once you graduate, in order to start building your credit history in case you need a loan someday in the future. Having no credit score is just as bad as having a bad credit score.

Credit mix looks at the different financial products, such as a home loan, credit card and personal loan. This is not a huge factor unless you have a very unlikely profile.

Finally, banks also look at how many financial products you have applied for recently. Every application authorises the bank to inquire about your credit score – a “pull”. 

Although it plays a minor role, many “pulls” could raise flags: if you recently opened a few new credit lines, you will be a greater risk for the bank because you haven’t proven yet that you are able to carry the new debt burden. 

Stop applying for new loans if you are continually rejected. Instead, work on fixing your score before reapplying.

However, be mindful that a credit score is only one of the factors your bank considers and a high score is not a guarantee for approved applications.

Anything from your current bank, employer and employment history, home location and home ownership can also play a role in the decision making by the banks.

Mark Reijman is co-founder and managing director of, dedicated to increasing financial literacy and to help you save time and money by comparing all credit cards, personal loans and broadband plans in Malaysia.


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