Q&A on how to increase your credit score

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Q1. What exactly is a credit score?

A credit score is the number generated from a borrower’s credit report and other data that banks use to subjectively evaluate a loan application. CIMB Equities Research predicted a 9.5 to 10.5 per cent loan growth for 2014, while national media reported that the Malaysia Building Society Bhd (MBSB) believed loans would rise 10 to 15 per cent, led by business loans, with less than nine per cent for consumer loans and five per cent for retail loans.

 

Q2.  Why do we need to have credit score?

Your lender will compute for your credit score and use it to approve or disapprove your loan. It will also be used by your lender to determine how much interest you pay for your loan.

 

Q3. How can I find out what my credit score is?

Banks and other lenders in Malaysia have their own way of generating a borrower’s credit score so this may not be easily attained by borrowers. However, Malaysian borrowers can get a copy of their credit report which is one of the bases for the credit score from the Credit Bureau of the Bank Negara Malaysia or credit reporting companies like CTOS and RAM Credit Information.

 

Q4. Does my credit card history affect my score?

Since your credit card history is part of your report, your lender will also see this and will take this into account when computing your credit score.

 

Q5. Would spending less harm my score?

Sending less means fewer chances of any credit card debts appearing on your credit report. This is also good for your credit score.

 

Q6. How do Credit Cards and credit scores relate?

Generally, the score takes into account a person’s payment history (35 per cent), amounts owed (30 per cent), and length of credit history (15 per cent). All of these major categories are affected by a person’s credit card use. Since debt history appears on the credit report, outstanding credit card debts could hurt your credit score.

 

Q7.  I’ve never worried myself about credit score, should I?

The credit score should be a concern for anyone who wants to borrow money. The credit score can be used to determine if you can qualify for a home mortgage or an auto loan. Source: http://www.veracitycredit.com/why-worry-about-credit-score.php

 

Q8. What are some of your advice on increasing the credit score?

• Get a copy of your credit report and correct any mistakes on the report

• Pay your bills because credit reporting agencies also include information on your overdue bills from utilities

• Do not max out your credit card to keep your balance to credit limit ratio low

 

Q9. What are the things that would hurt my credit score?

• Paying late

•Having an account sent to a

collection agency

• Defaulting on a loan

• Having a home foreclosed

• Having over-the-limit  credit  card balances

 

Q10. Would cancelling cards hurt my credit score?

Generally, cancelling credit cards can hurt one’s credit score because this will affect the balance to available credit ratio. So, it is better to only apply for a card that you need and plan on using. For full comparison of credit cards and financial products in Malaysia, go to comparehero.my.

 

This content is created by Floyd Sijmons for the readers of The Borneo Post. Sijmons is the chief executive officer (CEO) of CompareHero, the most extensive Malaysian financial comparison platform today. He believes in the value of financially educating Malaysians to help them save time and money. For more, visit CompareHero here.

 

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