Your credit score is an important part of your financial health in Malaysia. It helps banks decide if you can get loans, credit cards, or even housing. Systems like CCRIS and CTOS track your credit behavior, and certain mistakes can harm your score. Here are 12 common mistakes and how to avoid them.

10 Mistakes to Avoid That Can Ruin Your Credit Score

1. Late Payments

Late payments are one of the main reasons for a low credit score in Malaysia. Missing a payment on your credit card, car loan, personal loan, or home loan can negatively impact your credit report. These missed payments are recorded in your CCRIS (Central Credit Reference Information System) and CTOS (Credit Tip-Off Service) reports. Banks and lenders use these reports to decide if they should approve your loan or credit card application. A late payment can stay on your report for up to 12 months, making it harder to secure loans or get better interest rates.

Why Late Payments Affect Your Credit Score

• Lower Credit Score: Late payments reduce your creditworthiness in the eyes of lenders.
• Higher Interest Rates: Banks may offer higher interest rates due to the risk of non-payment.
• Loan Rejection: A poor payment history in your CCRIS or CTOS report can lead to loan rejections.
• Legal Issues: Unpaid debts can result in legal action or repossession of your assets.

How to Avoid Late Payments and Protect Your Credit Score

1. Set Up Auto-Debit Payments

• Why It Helps: Auto-debit ensures your bills are paid on time, improving your credit score.
• How to Set It Up: Use online banking platforms like Maybank2u, CIMB Clicks, or RHB Mobile to activate auto-debit.

2. Use Payment Reminders

• Mobile Apps: Banking apps like Public Bank PB Engage and RHB Mobile can send payment reminders.
• Phone Alerts: Set up calendar notifications or alarms to remind you of due dates.
• SMS Notifications: Opt for SMS alerts from your bank to stay informed about upcoming payments.

3. Pay the Minimum Amount

• Why It Matters: If you can’t pay in full, ensure you pay at least the minimum to avoid being marked as late in your CCRIS and CTOS reports.
• Example: Credit cards in Malaysia usually require a minimum payment of 5% of the outstanding balance or RM50, whichever is higher.
• Pro Tip: Avoid paying only the minimum regularly, as it leads to high-interest charges and growing debt.

4. Monitor Your Credit Report

• Why Check It: Regularly reviewing your CCRIS and CTOS reports helps you spot missed payments or errors.
• How to Check: Use services like CTOS SecureID or eCCRIS to access your credit report and credit score.

5. Consolidate Your Debts

• Simplify Payments: If you have multiple loans or credit cards, a debt consolidation loan can combine them into a single monthly payment.

2. Making Only Minimum Payments

Paying only the minimum amount on your credit card may keep your account current, but it doesn’t effectively reduce your debt. In Malaysia, with credit card interest rates ranging from 15% to 18% per annum, your outstanding balance can grow quickly, potentially leading to long-term financial challenges.

Why Making Only Minimum Payments is Risky

• High Interest Costs: Interest on credit cards in Malaysia is compounded daily. Paying only the minimum means a large portion of your payment goes toward interest, leaving your principal debt nearly unchanged.
• Slow Debt Reduction: Minimum payments (typically 5% of the outstanding balance or RM50, whichever is higher) only cover a fraction of your balance, causing your debt to take years to pay off.
• Negative Impact on Credit Score: While making minimum payments keeps you in good standing with your CCRIS and CTOS credit reports, a high credit card balance increases your credit utilization ratio, which can lower your credit score.
• Financial Stress: Rising balances can make it harder to secure additional loans or credit cards, as lenders may see you as a high-risk borrower.

How to Manage Your Credit Card Payments Better

1. Pay More Than the Minimum

• Why It’s Important: Paying more than the minimum, or clearing the full balance monthly, helps you avoid hefty interest charges.
• Example: If you owe RM5,000 at 18% interest and only pay the minimum (5%), it could take years to clear your debt while accumulating thousands in interest.

2. Track and Limit Spending

• Use Apps: Apps like Maybank2u, CIMB Clicks, and Standard Chartered SC Mobile can help track your expenses.
• Set Limits: Monitor your spending to avoid unnecessary charges and maintain manageable balances.

3. Consider Balance Transfer Plans

• What It Is: Balance transfer plans allow you to transfer your high-interest debt to another credit card with a lower or 0% interest rate for a set period.
• Available Options:Standard Chartered: Offers balance transfer plans with competitive rates.

4. Use a Personal Loan for Debt Consolidation

• Why It Helps: A personal loan typically has a lower interest rate compared to credit cards. Banks like Standard Chartered, RHB, and Maybank offer personal loans tailored for debt consolidation.

5. Set Payment Alerts

• Reminders: Use apps like Public Bank PB Engage or Standard Chartered SC Mobile to set up payment reminders.
• Auto-Debit: Automate your payments to avoid missing due dates.

6. Stick to a Budget

• Allocate a portion of your income toward debt repayment each month. Tools like CTOS SecureID can help track your credit score improvement as your debt reduces. 

Long-Term Benefits of Paying More Than the Minimum

• Faster Debt Clearance: Reduce your debt in months instead of years.
• Save on Interest: Lower total interest payments.
• Boost Credit Score: Improve your credit utilization ratio, positively affecting your CTOS and CCRIS credit reports.
• Financial Stability: Access better interest rates and loan approvals in the future.

By using strategies like paying more than the minimum, tracking spending, and leveraging tools like Standard Chartered balance transfer plans or personal loans, you can take control of your debt. These actions will help protect your credit score and ensure a healthier financial future in Malaysia.

3. Closing Old Credit Cards and Its Impact on Your Credit Score

Closing an old credit card may seem like a good idea, especially if you no longer use it. However, this decision can negatively affect your credit score in Malaysia. Your credit history and credit utilization ratio are key factors that lenders consider when assessing your financial reliability, and closing an account can harm both.

Why Closing Old Credit Cards is Risky

Shortens Your Credit History:

• Credit history length is an important factor in your CCRIS and CTOS reports. Older accounts contribute to a longer and more stable credit history, which is favorable to lenders.
• Closing your oldest credit card shortens your average account age, potentially lowering your credit score.

Increases Credit Utilization Ratio:

• Credit utilization ratio is the percentage of your available credit that you are using. For example, if you have RM10,000 in total credit and you use RM5,000, your utilization ratio is 50%.
• Closing a credit card reduces your total available credit, which can increase your utilization ratio and negatively affect your credit score.

Loss of Financial Flexibility:

• Old credit cards often come with better terms like lower interest rates or higher limits. Closing them reduces your options in case of financial emergencies.

Impacts Loan Approvals:

• A reduced credit score and shorter history might make it harder to qualify for loans or credit cards in the future.

When Should You Close a Credit Card?

• Annual Fees Too High: If the card's annual fees outweigh the benefits and you don’t use it frequently, consider closing it.
• Unused Card with Low Limit: If the card has a low limit and you rarely use it, it may have less impact on your overall credit history.
• Fraud or Misuse Risk: Close cards if they pose a security risk due to loss or unauthorized activity.

Alternatives to Closing Credit Cards

• Downgrade to a No-Fee Card: If the card’s annual fee is the issue, ask your bank (e.g., Standard Chartered, Maybank, or CIMB) if you can switch to a no-fee version of the card.
• Use the Card for Small Purchases: Keep the card active by using it for small recurring payments like subscriptions and paying off the balance monthly.
• Limit Spending but Keep the Account Open: Avoid using the card frequently, but keep it open to maintain your credit history and available credit.

4. Maxing Out Your Credit Card and Its Impact on Your Credit Score

Using too much of your credit card limit, or maxing out your credit card, can harm your credit score. It signals to banks and lenders that you may be financially overextended, which increases the perceived risk of lending to you. In Malaysia, this high usage is reflected in your CCRIS and CTOS reports and can lower your creditworthiness.

Why Maxing Out Your Credit Card is a Problem

High Credit Utilization Ratio:

• The credit utilization ratio measures how much of your available credit you’re using. A high ratio (above 30%) indicates financial strain and negatively impacts your credit score.
• Example: If your credit limit is RM10,000 and your balance is RM9,500, your utilization ratio is 95%, which is very high.

Lower Credit Score:

• High usage of your credit card signals poor financial management. This can lead to a lower credit score, making it harder to secure loans or credit cards in the future.

Higher Interest Charges:

• Maxing out your card often means you’ll carry a balance month to month, resulting in significant interest charges due to Malaysia’s credit card rates (15%-18%).

Risk of Over-Limit Fees:

• Some Malaysian banks charge over-limit fees if your spending exceeds your card’s credit limit.

Reduced Loan Eligibility:

• Lenders consider your debt-to-income ratio when approving loans. A maxed-out card increases your liabilities, reducing your chances of approval.

How to Avoid Maxing Out Your Credit Card

1. Keep Credit Utilization Below 30%

• Aim to use no more than 30% of your credit limit to maintain a healthy credit score.
• Example: If your limit is RM10,000, try to keep your balance below RM3,000.

2. Request a Credit Limit Increase

• If you frequently use your credit card, consider requesting a higher credit limit from your bank (e.g., Maybank, CIMB, or Standard Chartered). A higher limit reduces your utilization ratio.
• Caution: Only increase your limit if you can control your spending.

3. Pay Your Balance in Full

• Clear your balance every month to avoid interest charges and prevent maxing out your card. Set up auto-debit payments through apps like Standard Chartered SC Mobile or CIMB Clicks.

4. Use Multiple Credit Cards Wisely

• Distribute your spending across multiple credit cards to keep the utilization ratio low on each card.

5. Track Your Spending

• Monitor your expenses using banking apps like Maybank2u, Public Bank PB Engage, or RHB Mobile. Set limits for specific categories like shopping, dining, or entertainment.

6. Avoid Impulse Purchases

• Plan your purchases and stick to a budget to prevent unnecessary spending that pushes you closer to your credit limit.

5. Co-Signing a Loan and Its Impact on Your Credit Score

Co-signing a loan is a significant financial decision. When you co-sign a loan in Malaysia, you agree to take full responsibility for the debt if the primary borrower fails to repay. While this can help a friend or family member secure a loan, it also comes with potential risks that could harm your credit score and financial stability.

How Co-Signing a Loan Affects You

Shared Responsibility

• As a co-signer, you are legally obligated to repay the loan if the primary borrower defaults. This includes the full loan amount, late fees, and any interest.

Impacts on Credit Score

• The loan appears on your CCRIS and CTOS credit reports as if it were your own debt. Late payments, defaults, or high outstanding balances will negatively affect your credit score.

Increases Your Debt-to-Income Ratio

• Co-signed loans are included in your debt obligations, which can reduce your borrowing capacity. Lenders may hesitate to approve new loans or credit cards for you due to your increased liabilities.

Risk of Loan Defaults

• If the primary borrower fails to repay, you may be forced to make payments, even if you had no direct benefit from the loan.

Relationship Strain

• Co-signing can lead to personal conflicts if the borrower struggles with payments or defaults on the loan.

6. Using Credit Cards Irresponsibly

Using credit cards without a clear plan or for unnecessary expenditures can lead to severe financial consequences, particularly in Malaysia, where credit card debt is a common financial challenge. Mismanagement of credit cards, such as taking frequent cash advances or overspending, can negatively impact your financial stability and credit score. Here’s why:

1. High-Interest Rates on Cash Advances

In Malaysia, credit card cash advances often come with high-interest rates, typically ranging from 15% to 18% annually. Additionally, a cash advance fee—commonly around 5% of the withdrawn amount—is charged. This makes cash advances an expensive option for quick cash and should be avoided unless absolutely necessary.

2. Debt Accumulation

Without proper budgeting, it is easy to overspend on credit cards, especially during sales or promotional events like the annual "11.11" and "12.12" shopping festivals in Malaysia. The convenience of credit cards may encourage purchases beyond one's means, leading to accumulating debt that can spiral out of control.

3. Impact on Credit Score

Credit scores in Malaysia, managed by agencies like CCRIS (Central Credit Reference Information System) and CTOS, play a critical role in obtaining loans and financing. Late payments or consistently carrying high credit card balances can harm your credit score, making it difficult to secure future financial products like home loans or personal financing.

4. Psychological Stress and Financial Burden

Irresponsible credit card use can lead to significant financial stress. Monthly minimum payments, compounded interest, and penalty charges for late payments can put immense pressure on your finances. This can affect your overall well-being and long-term financial goals, such as saving for retirement or children's education.

7. Changing Your Credit Limit Frequently

1. Reducing Your Credit Limit

• Impact on Utilization Ratio: The credit utilization ratio is the percentage of your available credit that you’re using. For example, if you have a credit limit of RM10,000 and your outstanding balance is RM2,000, your utilization ratio is 20%. Lowering your credit limit to RM5,000 increases the ratio to 40%, which can negatively impact your credit score. A higher utilization ratio signals to lenders that you may be over-reliant on credit.
• Behavioral Concerns: Frequent reductions in credit limits might indicate financial instability to lenders, as it suggests you may not want access to higher credit or anticipate challenges in managing larger limits.

2. Increasing Your Credit Limit

• Hard Inquiries: When you request a credit limit increase, banks or financial institutions may perform a hard inquiry on your credit report. In Malaysia, such inquiries are tracked by credit reporting agencies like CTOS or CCRIS. A hard inquiry can temporarily lower your credit score.
• Potential Over-borrowing: If lenders perceive that you’re attempting to access more credit than you need, it could raise red flags about potential overspending or financial strain.

3. Frequent Adjustments

• Instability in Credit Behavior: Regularly changing your credit limit may make you appear inconsistent or financially insecure, which could negatively affect your creditworthiness in the eyes of Malaysian lenders.
• Monitoring Trends: Credit reporting agencies in Malaysia track your financial behavior over time. Frequent changes could create a pattern of uncertainty.

4. Best Practices for Managing Credit Limits in Malaysia

• Maintain a Low Utilization Ratio: Aim to keep your credit utilization ratio below 30%. If you frequently use a high percentage of your available credit, it might be better to increase your credit limit strategically rather than reducing it.
• Be Selective About Increases: Only request credit limit increases when necessary, such as for emergencies or significant planned expenses.
• Avoid Frequent Changes: Unless there’s a valid reason, avoid frequently adjusting your credit limit to maintain a stable credit profile.
• Check Your Credit Score Regularly: Use services like CTOS or CCRIS to monitor your score and ensure your credit adjustments aren’t negatively affecting your financial reputation.

8. Avoiding Credit Entirely

1. Lack of a Credit History

• Credit Scores Require Activity: Credit scores in Malaysia, tracked by agencies like CTOS, CCRIS, and RAMCI, rely on your credit history to determine your creditworthiness. If you don’t use credit, there’s no activity to assess, resulting in a "thin file" or no credit score at all.
• Impact on Loan Eligibility: Without a credit history, lenders are unable to evaluate your risk as a borrower. This can lead to loan rejections or being offered less favorable terms, such as higher interest rates or lower credit limits.

2. Missed Opportunities to Build Trust

• Demonstrating Responsible Behavior: Using credit responsibly—by paying bills on time and keeping utilization low—demonstrates financial reliability. This builds trust with lenders, increasing your chances of approval for larger financial commitments, like home loans or car financing.
• Access to Better Financial Products: Good credit scores unlock access to premium financial products, such as credit cards with rewards, better loan terms, or flexible repayment options. Avoiding credit entirely means missing out on these benefits.

3. Practical Implications in Malaysia

• Property Rentals: Many landlords in Malaysia request credit reports to assess potential tenants. No credit history can make you less competitive in the rental market.
• Government Schemes: Participation in schemes like PR1MA housing loans often requires a review of your credit profile.
• Employment Checks: Certain employers, particularly in the finance industry, may review credit reports as part of background checks.

4. Balanced Credit Usage vs. No Credit

• Build Credit Responsibly:Start with a low-limit credit card or a personal loan.
• Pay off balances in full and on time to avoid interest and late fees.
• Use Credit Strategically:Use a credit card for routine expenses like groceries or utilities, but ensure you don’t spend beyond your means.
• Monitor Your Credit Report:Regularly check your reports via CTOS or CCRIS to ensure accuracy and track your progress.

5. The Downside of Avoiding Credit

• Limited Financial Flexibility: In emergencies, having no credit history means you might struggle to secure funds quickly.
• Higher Costs: Without a credit history, you’re likely to face higher interest rates and fewer options for loans and credit cards when you finally need them.

6. Alternatives for Non-Credit Users

• If you're wary of traditional credit, consider options like secured credit cards, which require a deposit and help build your credit without the risk of overspending.
• Explore micro-loans or buy-now-pay-later (BNPL) services to build a minimal credit history.

9. Taking On Unnecessary Credit

Applying for too many credit cards or loans in a short time can lower your score due to multiple hard inquiries.

Impact of Multiple Hard Inquiries

Each time you apply for a credit card, personal loan, or any form of credit, the lender conducts a hard inquiry to review your credit report. In Malaysia, this process is tracked by agencies like CTOS, CCRIS, or Experian. Multiple hard inquiries within a short period signal lenders that you might be in financial distress, reducing your creditworthiness. This can lower your credit score, making it difficult to secure favorable credit terms in the future.

Higher Debt-to-Income Ratio (DTI)

Taking on unnecessary credit increases your debt-to-income ratio, which measures your monthly debt obligations relative to your income. Banks and financial institutions in Malaysia, such as Maybank, CIMB, or Bank Negara, consider a high DTI a red flag when assessing your ability to manage debt responsibly. A high DTI can lead to loan rejections and a deteriorating credit profile.

Missed or Late Payments

Acquiring unnecessary credit might stretch your financial resources thin. If you fail to make timely payments, these delinquencies are reported to credit bureaus like CCRIS (Central Credit Reference Information System), which can further harm your credit score. Late payments also attract interest, compounding your financial burden.

Reduced Credit Age

Frequently opening new credit accounts shortens your average credit age. In Malaysia, a longer credit history typically improves your creditworthiness as it shows lenders you have managed credit responsibly over time. A short credit history could indicate risky borrowing behavior.

Increased Credit Utilization

If you actively use the new credit you’ve taken on, your credit utilization rate—the percentage of available credit you use—will increase. Credit agencies like CTOS recommend maintaining a utilization rate below 30%. A higher rate can negatively impact your score, as it suggests over-reliance on credit.

Risk of Over-Indebtedness

Malaysia has witnessed an increase in personal debt levels, as highlighted in reports by Bank Negara Malaysia (BNM). Taking on unnecessary credit can lead to over-indebtedness, making it harder to meet repayment obligations. This might force you into seeking debt restructuring services, which further flags financial instability to lenders.

10. Ignoring Errors on Credit Reports Can Harm Your Credit Score

Mistakes in your CCRIS or CTOS reports, like wrong loan amounts or unrecognized accounts, can harm your credit score.

Impact of Credit Report Errors

Mistakes in your CCRIS (Central Credit Reference Information System) or CTOS report can have a significant negative impact on your credit score. These errors might include:

• Incorrect loan amounts.
• Unrecognized accounts or debts that don't belong to you.
• Delinquent payments wrongly attributed to your account.
• Closed accounts still marked as active.

Such inaccuracies can portray you as a higher credit risk, reducing your chances of getting approved for loans, credit cards, or mortgages.

How Errors Occur

Errors can arise due to:

• Clerical mistakes by lenders when submitting data.
• Identity theft, where unauthorized individuals open accounts in your name.
• Data mismatches between your CCRIS/CTOS record and lenders’ systems.
• Delayed updates, where payments or account closures aren't promptly reported.

Consequences of Ignoring Errors

• Lower Credit Score: Even a single false delinquency or high debt amount can drag your score down significantly.
• Rejections for Credit Applications: Banks like Maybank, CIMB, or RHB may deny applications based on inaccurate information.
• Higher Interest Rates: A lower credit score results in lenders categorizing you as a high-risk borrower, leading to unfavorable loan terms.
• Difficulty Securing Employment or Rentals: Some employers and landlords in Malaysia check credit reports as part of their screening process.

Steps to Rectify Errors on CCRIS or CTOS Reports

• Obtain Your Credit Report: Access your CCRIS report via Bank Negara Malaysia’s eCCRIS portal and CTOS reports directly from the CTOS website or app.
• Review the Details Thoroughly: Check for inaccuracies such as wrong loan amounts, duplicate accounts, or unrecognized transactions.
• Dispute the Errors:
  • For CCRIS: Contact the financial institution that reported the incorrect data. You may also lodge a complaint with Bank Negara Malaysia if the issue persists.
  • For CTOS: Use the CTOS Dispute Resolution service to correct errors. Provide documentation, such as payment receipts or bank statements, to support your claim.
• Follow Up: Ensure corrections are made and reflected on your report. Keep a record of all communication and resolutions.

Maintaining a good credit score in Malaysia requires consistent habits. Avoid late payments, high spending, and unnecessary credit applications. Keywords like credit score mistakes Malaysia, how to improve credit score Malaysia, credit card tips Malaysia, and CCRIS and CTOS tips can guide you toward better financial management. Regularly check your reports and use credit wisely. With good credit, you’ll have better chances for loans, lower interest rates, and more financial opportunities. Start today and take control of your financial future!