How to Improve Your Credit Score for a Home Loan in Malaysia
A good credit score increases your chances of getting a home loan approved with better terms and lower interest rates. In Malaysia, banks and financial institutions refer to CCRIS (Central Credit Reference Information System) and CTOS reports to assess your creditworthiness.
1. Understanding Credit Score in Malaysia
i) What is a Credit Score?
A credit score is a 3-digit number (300 – 850) that represents your financial health. A higher score means you have a lower credit risk, increasing your chance of loan approval.
ii) Credit Score Ranges
| Score Range | Rating | Approval Chances |
|---|---|---|
| 750 – 850 | Excellent | Very high chance of approval with low interest rates |
| 650 – 749 | Good | High chance of approval |
| 500 – 649 | Fair | Possible approval but with higher interest rates |
| 300 – 499 | Poor | Low chance of approval |
iii) Where to Check Your Credit Score?
You can check your credit report from:
- CCRIS (Bank Negara Malaysia) – Free report (does not include a credit score).
- CTOS & Experian – Paid services that provide detailed reports with credit scores.
2. Factors That Affect Your Credit Score
| Factor | Impact on Credit Score |
|---|---|
| Payment History | 35% – Late or missed payments reduce your score. |
| Debt Utilization | 30% – High credit card usage lowers your score. |
| Length of Credit History | 15% – Longer history builds a stronger score. |
| Credit Mix | 10% – A mix of credit cards, personal loans, and mortgages is better. |
| New Credit Applications | 10% – Too many applications in a short time reduce your score. |
3. Steps to Improve Your Credit Score
i) Pay All Bills on Time
- Set auto payments for credit cards and loans.
- Even one missed payment stays on your record for 12 months.
ii) Reduce Credit Card Utilization
- Keep credit card usage below 30% of your limit.
- Example: If your limit is RM10,000, avoid spending more than RM3,000.
iii) Avoid Multiple Loan Applications at Once
- Every new loan or credit card application temporarily lowers your score.
- Space out applications by at least 6 months.
iv) Settle Outstanding Debts
- Pay off personal loans, credit cards, or overdue payments.
- If possible, increase your monthly repayment to clear debts faster.
v) Maintain Older Credit Accounts
- The longer your credit history, the better.
- Do not cancel old credit cards, especially if they are in good standing.
vi) Diversify Your Credit Mix
- Having different types of credit (e.g., home loan, car loan, and credit card) improves your score.
vii) Correct Any Errors in Your Credit Report
- Get a free CCRIS report from Bank Negara Malaysia and check for errors.
- If there are mistakes, file a dispute with CTOS or Experian.
4. How Long Does It Take to Improve a Credit Score?
| Situation | Time Needed to Improve |
|---|---|
| Missed Payments | 6 – 12 months |
| Maxed Out Credit Cards | 3 – 6 months (if reduced below 30%) |
| Multiple Loan Applications | 6 – 12 months |
| Settled Debts | 1 – 3 months (depending on amount) |
5. Benefits of a Good Credit Score for Home Loans
✔ Higher chances of loan approval
✔ Lower interest rates (e.g., 3.5% instead of 4.5%)
✔ Higher loan amount approved
✔ Better loan terms & repayment flexibility
Conclusion
A good credit score is essential for getting a home loan with favorable terms. To improve your credit score, pay your bills on time, reduce debt, avoid multiple applications, and maintain a long credit history.
