What is a credit score? Basically, a credit score is what your lenders will need to see in order to assess your eligibility for a loan, in addition to other requirements. It determines your creditworthiness, and a higher score will grant you some benefits, for example:
- Low interest rates for loans and credit cards
- Higher chance for loan and credit card approval
- Approval for higher limits
- More leverage to negotiate for a lower interest rate on your credit card or a new loan
To find out what your credit score is, you can get your credit report from the two main sources in Malaysia – the Central Credit Reference Information System (CCRIS) and the CTOS Data Systems Sdn Bhd (CTOS).
CCRIS is managed by Bank Negara Malaysia, while CTOS is a private entity. Read our blog Credit Report FAQ: What’s CCRIS and How Is It Different from CTOS? for some useful insights.
The following is a CTOS Score system:
|Score||What the score means to your lenders|
|744 – 850||Excellent – You’re a very favourable customer|
|718 – 743||Good – You’re a prime customer|
|697 – 717||Above Average – You’re viable for new credit|
|651 – 696||Below Average – You’re less viable for credit|
|529 – 650||Weak – It’ll be difficult for you to get credit|
|300 – 528||Very Weak – It’ll be even more difficult for you to get credit|
|No score||Your score couldn’t be generated due to insufficient information|
You might want to check these 7 signs to realise how credit healthy are you. If you tick most or all of the criteria on this list, you’re definitely headed towards the right direction:
1. You have in place a substantial emergency fund
Having an emergency fund with a substantial amount of money will protect you from missing out on your monthly payments even if your finances are largely channelised towards addressing an unanticipated situation like a medical emergency or job loss. It will also prevent you from maxing out your credit cards when you need to repair your home or car or pay for other urgent things.
2. You frequently monitor your credit report
People who understand their credit score and how it affects them are more likely to gain a better score, especially when they keep a tab on it. If you haven’t checked on your credit score, it’s time to do so. Monitor your credit report frequently to improve your score.
Must read: 7 Useful Tips to Improve Your Credit Score
3. You’re able to reap the credit card rewards because you don’t carry a balance
To be able to reap the credit card rewards, one must not carry a balance. Knowing how to take advantage of your credit cards for rewards like cashback or air miles indicates financial savviness, and lenders would prefer someone who knows how to swipe their cards right. Not carrying a balance will likely give you a better credit score.
4. You receive plenty of credit card offers
If you keep getting lots of credit card offers, rest assured that the card issuers are noticing you because of your higher creditworthiness. This might be the right time for you to ask for a lower interest rate for your cards, or upgrade your credit card with a higher credit limit.
5. You’re offered the best loan rate
People with good credit health tend to get lower rates which allows them to save a lot of money in the long run. On average, borrowers with high credit scores between 781 and 850 are likely to be offered the lowest interest rates for a loan, compared to people with low credit scores. If loan issuers are offering you the best loan rate, that’s a good sign your credit is healthy.
6. You don’t have a negative payment history
You’ll only have a good credit score if there’s no negative mark on your report, for example, defaults on your financial responsibilities or collections on your accounts. If you ruined your payment history, it could decrease your credit score for at least seven to 10 years.
Related: 5 Useful Tips to Become Debt-Free
7. You always pay your bills on time (and have never missed any)
If you consistently pay your bills on time and have never missed any payment, your credit score is more likely to increase. Remember, your payment history makes up the largest portion of your credit score.
Getting on your lender’s good side, and how the scores are calculated
If you barely tick anything from the list above, don’t fret just yet. You can still work your way up and get on your lender’s good side. All you need to do is to know and understand how a credit score is calculated, and start from there.
The CTOS Score is calculated based on the credit information acquired from both CCRIS and CTOS’s database. These 5 factors make up the CTOS Score:
- Payment History (45%)
Whether you pay your loans on time or have missed payments in the past
- Amounts Owed (20%)
The number of credit facilities and the amount owed to the banks
- Credit History Length (7%)
How long have you held a credit facility (e.g. credit card or a loan)
- Credit Mix (14%)
Types of loan and credit cards you hold – secured (home, car loans) vs unsecured credit (credit cards, personal loans)
- New Credit (14%)
Have you been approved for new credit facilities recently?
By knowing the things that will contribute to your credit score, you’ll be able to fix your credit health. Aim for an excellent score and keep on improving your score to enjoy more benefits!
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