When it comes to the realm of banking related products, you may hear many technical terms and while you may not understand the meaning of everything you hear, it is a good practice to figure out what they mean as they may play a pivotal part in your financial life.
One such term is your credit score. Read on to find out what exactly a credit score means and why it's important.
Credit history is a documentation of how responsibly you handle your debts and loans.
A credit report is a record displaying your credit history. It contains information taken from a database system called the Centralised Credit Reference Information System (CCRIS). The information comprises of:
A credit score can be understood as the representation of your credit history in a numerical form.
A credit agency determines a three-digit number describing your credit repayment behaviour, the existing debts you owe and many other factors. This number is known as a Credit Score.
A government-appointed credit agency creates credit scores. There are four authorised credit agencies in Malaysia who provide credit score:
A credit agency is an organisation that collects credit rating information about a country’s citizens to make it available to banks and other financial institutions. This information is stored in a database known as Central Credit Reference Information System (CCRIS).
A good credit score always ranges from 697 to 850. Such a score indicates a good repayment capability of a customer and increases the chances of getting a loan. With a high credit score falling within this range, you can easily get a loan from most banks along with a good interest rate. You may also get the privilege of faster loan approval time.
A credit score is important because:
The CTOS score is calculated based on the information gathered from CCRIS and CTOS databases. The 5 factors that make up your score are given below:
Credit scores usually contain the history of your credit behaviour for the past 12 months. And, information on CCRIS will be updated on the 15th of every month. Therefore, you can get an updated report (in turn, an updated score) once every month.
Different credit scores are categorised with specific explanations on the probability of getting a personal loan. The categories are given below:
|744-850||You are most favourable to get a loan|
|718-743||You are the prime customer for money lenders|
|697-717||Your score is above average and you are eligible for a new credit|
|651-696||Your score is below average making it less likely for a new credit|
|529-650||It may be difficult to get a new credit line|
|300-528||Your score will affect your credit application|
|No Score||Insufficient information on your credits|
Credit agencies do not blacklist any name. However, it is left to the money lending institution’s discretion to grant or deny a loan based on the credit score.
There are many factors that can hurt your credit score, such as:
You may improve your credit score in the following ways:
A credit report is a consolidation of information such as
In contrast, a credit score is just a 3-digit numerical representation of what is there in the credit report.
Having no credit score means that you do not have a credit history. In this case, you can make efforts to build your credit history by getting a basic credit card. Just make sure to use the card sparingly and repay the overdue balance on or before the due date. This could give you a good credit score in a shorter period of time.
There are many factors other than credit score that a bank considers before approving your application for any financial product. A few of such factors are:
CCRIS, a digital repository of credit reports, is managed by Credit Bureau of Bank Negara Malaysia. All the information sent by banks and financial institutions are stored in the database system of CCRIS. This information is automatically sent to the respective credit reports and is made available to everyone requesting for the report.
Furthermore, under the Credit Reporting Agencies Act 2010, certain agencies are given the authority to access individual reports based on their consent and they are:
As you can see, CTOS is one of the credit reporting agencies that provide credit reports to the citizens of Malaysia. It also provides reports to the member institutions so that they can make decisions on lending credit.
CCRIS reports are given free of cost, whereas the CTOS provides basic reports for free. An advanced report with all minute details included require you to pay a certain fee.
They also differ in the way information is gathered to prepare the report. CCRIS makes use of the information updated by the financial institutions. On the other hand, CTOS gathers information from sources in addition, such as legal proceedings published in newspapers, the Insolvency Department of Malaysia, the Companies Commission of Malaysia, and subscriber contributions.
You can get a copy of your CCRIS credit report for free. All you need to get the credit report, in turn, credit score, is to visit a BNM branch office and ask for the credit report. You can get the report on the spot. However, don’t forget to carry your MyKad and other identity proof documents.
With a credit score, you can get to know what banks or money lending agencies think of you. So, before you apply for a loan, get your credit report and verify if the score is favourable enough for you to get a loan without hassle. If there are issues with the score, try to fix them. Once you fix the issues, get another report and confirm that you can go ahead with the loan application. You can now experience faster loan approval.
As mentioned earlier, the information on CCRIS is updated on the 15th of every month. To give an illustration of how it works, say you have an outstanding loan balance of RM3,000. If you repay the entire outstanding balance in one final settlement on February 13, the settlement details will be updated on 15 February.
In another case, if you make the final settlement on 17 February, then the update on the settlement will reflect on the credit report only on 15 March.
Checking your own credit score may not hurt or reduce it. However, if banks or financial institutions check your score over-and-over within a short period of time, it will affect your credit score.
You can get a CTOS report either online or offline.
Reading Your Credit Report
Though the report holds the credit history of 12 months, the credit agencies maintain the credit history of each individual for 24 months in the form of archives. Your credit history will not be considered by any financial institutions beyond two years.
Q. When I settle the existing loan in full, how long does it take to reflect in the credit score?
A. The update on full settlement of your loan must be provided by the associated bank. At the latest, it may be updated by the 10th of the next month.
Q. Does my income affect my CTOS score?
A. No. Your income does not affect your CTOS score.
Q. Does the free credit report I get include my credit score?
A. No. The credit report you get at BNM branch office does not include your credit score. To know your score you have to buy the MyCTOS Score Report. In addition, this report includes your payment history given by CCRIS & DCHEQs.
Q. I was declared bankrupt a few years ago. Does this affect my loan application now?
A. If you have repaid your loan after being declared as a bankrupt, then you must contact Malaysian Insolvency Department at the number 03-88851000 to get the latest update on your bankruptcy status. You can then inform the bank or the financial institution on the latest status so that the loan application can be processed without hurdles.
Q. How is CTOS score different from credit scores offered by other institutions?
A. A CTOS score includes data regarding litigation and trade references. It is based on FICO standards, which may not be covered by other credit scores.
Q. What is a special attention account?
A. A special attention account is an account that is closely monitored by the financial institution. A non-performing loan gets special attention as the bank that offered the loan is not earning any income from the loan. This happens when the loan borrower defaults his monthly payments consecutively for three months.
Q. Can a record be removed from CTOS credit report?
A. A record can be removed from CTOS report when you provide a proof of a fraud/mistake being settled two or more years ago. This is done in accordance with the Credit Reporting Act.
Q. How does having multiple credit lines affect my credit score?
A. If you have multiple credit lines and a good payment history, it will get you a higher credit score. Indeed, having a variety of loans means that you are good at managing these loans. However, if you have not managed these loans well, it will definitely lower your credit score.
Q. Is it possible to get the credit report of a deceased person?
A. Yes. One can get the credit report of a deceased person. But, the credit report of a deceased person will be shared only with the legal descendant of the deceased.