You must be aware that a low credit score can hamper all the good opportunities to get a loan at a low interest rate. Therefore, you are required to check your current credit score as the foremost step if borrowing finances are on your mind. If you figure out that the score is not up to the mark, you may end up paying a lot of your money for interest alone.
The only way out of this is to increase your credit score. But, you need to understand that the score cannot be increased overnight. But worry not. Here are a few tips that can be useful in improving your score faster.
- Why the Score is Low: You can get the credit report for free by visiting the nearest branch of Bank Negara Malaysia (BNM). When you get the credit report, check why your credit score has gone low. Is it because you missed out on payments? Or, because you were a guarantor for a friend who defaulted the payment? Find the root cause of the low score so that you can try to heal the problem from the root.
- Pay on Time: The first mandate rule to improve your credit score is to pay all your instalments by the due date. Your credit report contains the information on two years’ credit history. And, 35% of the score depends on your credit repayment behaviour in the past. So, you cannot expect that your repayment pattern will be forgotten any soon.
- Credit Card Utilisation: You are not supposed to use your card beyond 30% of its credit limit. Even if you have multiple credit cards, the total utilisation cannot go beyond 30%. The lower the utilisation rate, the better is your credit score. Therefore, try to reduce the outstanding balance on your card. That means try to clear off the bills on time every month.
- Steady Job and Other Assets: Do you know? A steady job can improve your credit score. Such a job makes you look more likely to be repaying your commitments on time. Also, if you have purchased stocks or if you have opened a time deposit account, it means that you are doing pretty well in your life. That, in turn, means, you have enough finances to stand by your commitments or you have enough emergency funds. So, you will not default your payments.
- Reduce the Existing Debt: If you have multiple credit cards, then try to consolidate the debts into one card and discontinue the rest of the cards. This would make it easy for you by reducing the instalment sum. Also, it would make things simpler as far as credit score is concerned.
However, you have chances to prove that you have been more responsible lately and you are reliable in terms of the repayment. Also, it would be good to check if all your accounts are active and standing on good terms with the bank.
The other thing you need to keep in mind is you must be a loyal customer to the bank. You must have a good relationship with the bank for a few years so that the bank can be favourable to you. Your loyalty can also fetch you some bonus points in the credit score. However, it does not mean you cannot switch banks when another bank offers you half the interest rate.
Also, keep an eye on the credit score regularly. When you see your score getting better, you can be much more motivated to in continuing the good work. Regularly here does not mean once every day. You can get the latest report once in couple of months and update yourself with the current score. Be smart and start working towards your goal of increasing the credit score!