Many people underestimate the importance of having a good credit score, or rating. Credit ratings are like report cards for borrowers. Without a good rating, it can cost you a lot more to take out a loan from the bank, for instance, you might be charged a higher interest rate compared to others who have a better rating.
The good news is, it’s not difficult to improve your score, although like losing weight, it doesn’t happen overnight. Below are some tips to help you do just that:
Pay your bills on time
Banks love people who pay their bills on time. If you have a history of late repayment, it will show up in your credit report generated by the Central Credit Reference Information System (CCRIS) under Bank Negara Malaysia (BNM), and this report is accessible to all banks. Banks can easily request for your credit history through the Credit Bureau under BNM, and are known to be unforgiving with bad records.
Have a steady job
Having a job with a steady income would significantly improve your credit score. A steady source of income signifies that you are less likely to miss your loan repayment, which means you’re a less risky borrower to the bank. A less risky borrower typically has a better credit score.
Own some assets
If you own some assets, your credit score would improve. Banks view assets such as investment properties and saving deposits as a signal of your financial well-being.
Read more to understand about other asset classes that you can invest in to improve your credit rating.
Reduce your debt
In order to have a better credit rating, you should not only ensure that you consistently meet the repayment of your debt, but where possible, pay in full the outstanding balances on your debt. One good idea is to reduce the number of credit cards and debt accounts you own. You can utilise a credit card balance transfer facility to consolidate your credit card account or a personal loan to merge your debt accounts. Banks are well aware of your borrowings elsewhere, and having many different debt obligations when you try to take out another loan is never a good idea!
Be a loyal customer
Banks normally treat loyal customers better. Having a long credit history with a particular bank will generally enhance your credit rating with the bank. However, if you can save significant amount of money by switching banks, you should probably do so!