In this phase, your ‘bad credit score’ will become your foe if it is in an unforgivable state or above the standard rate – and you can say goodbye to be qualified for bank loans and credit cards in Malaysia. Wondering how to avoid it from happening?
Let’s know about credit scores and simple steps to avoid having a bad score.
What is a credit score?
A credit score is basically a number the lenders know about a person’s track record regarding payment ability. By knowing the credit scores, lenders decide if the person is fine enough to be provided with a new loan or a credit card.
As usual, your previous financial commitments will be checked while evaluating your credit score from your credit report. A credit report carries information about your credit activity for the last 12 months and your current credit situation. For instance, you had paid your loans on time or if you had been missing payments, the status of outstanding debt, and as such. The report will not tell you whether your credit has a good or bad standing.
To know how good or bad your credit score is, you can take help from CTOS (Credit Tip Off Service). CTOS is a private credit scoring agency that banks and financial institutions in Malaysia widely use. You can sign up for an account where you can access a free basic report.
Why is a credit score important?
Since a credit score is your ‘financial report card’, which is reviewed to apply for a loan or a credit card, it has huge importance. When you have a good credit score, it will really be helpful for;
- You will be able to save money.
- Banks and lenders will be more likely to approve your credit applications.
- You will get more negotiating power.
- You will get a better mortgage and interest rates.
- Your credit approvals will be faster.
- You will get better car loans and auto insurance.
Tip 1: Think before taking any new expenses
If you set up a plan and execute it, this habit will make you move forward within a system. It will ultimately help you not to waste money by taking on any new expenses.
When you decide to take on new expenses, you have to inquire about the deal. And, a lot of inquiries within a short period can indicate to the lenders that you are searching for lines of credit that you will not be able to pay. You definitely will not want them to think about it since it will negatively affect your credit report. So, you should think before taking any new expenses and set up a plan.
Tip 2: Managing your money with efficiency
When you have a plan, you will be able to manage your money with efficiency as well. After a chaotic year like 2020, if your finances are affected, probably now is the time for you to make a budget in 2021. You can help pay off your debt and keep track of your spending by doing it. A systematic process will clarify the amount you are earning and how much you can safely spend later. Eventually, it will help you get a good credit score.
Tip 3: Build savings to avoid a bad credit score
Since the most important part of your credit score is your payment history, good savings will help you avoid a bad credit score. You should make sure to have enough money in your checking account after paying all your scheduled bills, and then you can save money by maintaining your plan. You will not have to deal with any sudden fall in the score when you know you will not have to deal with any sudden fall in the score, and you can focus on building savings by fulfilling all the bills. Later on, the savings will definitely give you a fruitful outcome.
The world has been seeing so many ups and downs since last year. After such a difficult year, a strategic move towards making a good credit score can be a stepping stone for you to recover or uplift your financial status. It will surely bring good news to you in the form of a home or car purchase or fine-tune your goals.
You should check your credit score at least once a year. Services like iMoney’s CreditScore currently offers credit score checking for free.
Before you go looking for your next investment endeavour, you should check your credit score at least once a year to avoid those awkward conversations with your bank.
Have a chat with our esteemed team to provide you with their financial advice for a better future!
