You can enhance your credit score.

E ach time any of us apply for a loan or credit cards from a bank, our personal details will be released to the bank. Information divulged by us would essentially include our name, address, contact number, employment details, identity card number, bank information, age, marital status and much more.

Bank Negara Malaysia (BNM) currently maintains the Central Credit Reference Information System (CCRIS), a system that captures all credit data received from the financial institutions in Malaysia.

By this we mean, information on your housing loans, car loans, credit cards as well as personal loans. It also includes your other commitments, jointly made with friends or family members. In addition, the system also captures all of your new loan applications. As such it is safe to say that your banks are fully aware of how many banks you have already approached prior to knocking on their doors for new loan applications.

Each bank has its unique way of assessing your credit score. From the personal information they gather on you, plus all the historical loan applications and repayment activities associated with you, the bank would be able to make informed decisions with regard to whether to lend you money or even call back all the credit facilities that have been granted to you.

How Do You Improve Your Credit Score?
Tip # 1: Get a Job and own a house

The first thing that will be the focus of a bank officer’s eyes would be an individual’s credit score. He would be concerned with whether you have a stable job; one with steady flow of income.

Naturally, he would also be making reference to your current job position. This pertinent information would provide some indication as to whether you would be able to support your daily expenses and whether you would be able to service your current and future loans.

Another factor that influences your credit score is whether you are a home owner as owning your own home implies stability and a better overall standard of living.

Tip # 2: Have fewer credit cards and pay in full
Given the current high cost of living and tough business environment, many people are finding it difficult to fulfil their financial commitments. Due to over spending and being unable to control their expenses, many resort to owning many credit minus the ability to settle all of the outstanding balances.

If you wish to secure a better credit score, you should manage repayment of all outstanding balances in full as well. This is of course, apart from controlling the number of credit cards you carry in your wallet.

Many actually try to use one credit card to repay other credit card balances. What this approach does is intensify your degree of debt by aggregating the amount you owe. The best solution would be to limit your expenses.

Tip # 3: Settle your bills on time
Banks are always sensitive to your repayment history. If you have a history of dragging or deferring repayments, it will be difficult for you to take on new loans from any banks in Malaysia.

From the CCRIS, the new bank you approach for credit facilities will be completely aware of your repayment history with other banks. Hence, you should pay all of your bills on time in order to avoid having bad records on your financial history.

Once you have a bad track record, it creates a bad image for you as a borrower, and this image will last for a long time. Furthermore, banks are in the habit of asking you the same question when you apply for new loans and explanations are often sought once they discover that you have a history of failing to make timely repayments.

Tip # 4: Be loyal if it doesn’t cost you

Where possible, try to stick to one bank. A long credit history will enhance your credit score. However, this is on the condition that your bank continuously offers you very competitive rates on all of your borrowings.

Given the current high level of competition in loan interest rates, if you can refinance your housing loans at lower interest rates, you should seriously consider switching your loans to other bank. This will save you a lot of interest expense.

Tip# 5: Limit your debt and debt accounts

Based on your current level of income and your borrowing capacity, you should try to limit the amount of outstanding debts as well as the number of debt accounts that you own.

As mentioned earlier, banks are well aware of your total outstanding borrowings and the types of loan accounts that you maintain in other banks. You should not use up all your borrowing capacity and stretch your finances to the extent that you hardly have any cash surplus for emergency purposes.

Ooi Kok Hwa of MRR Consulting is licensed under the Capital Market Services Act  2007. The views expressed in this article are those of the writer and do not necessarily represent the official views of SIDC. 

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