Having a good credit score is important if you want to buy property in Malaysia. A strong credit score makes it easier to get a home loan with better terms, like lower interest rates. In Malaysia, your credit score is tracked by two systems: CCRIS (Central Credit Reference Information System) and CTOS. Using a credit card the right way can help you improve your credit score. Here’s how you can do it in simple steps.

What Affects Your Credit Score in Malaysia?

Your credit score depends on:

• Payment history: Whether you pay your bills on time.
• Credit utilization: How much of your credit card limit you use.
• Credit history length: How long you’ve had your accounts.
• Types of credit: Having a mix of loans, credit cards, and other credit.
• New credit applications: Applying for too many loans or credit cards in a short time.

CCRIS shows your loan and repayment records from banks, while CTOS collects data like legal cases and bankruptcies. Both are used by banks to decide if they will give you a loan.

In Malaysia, financial institutions often require a clean repayment history of at least 12 months before approving a housing loan. This highlights the importance of managing your debts responsibly.

11 Ways Credit Cards Can Help You Build a Strong Credit Profile in Malaysia

1. Pick the Right Credit Card

Choosing the right credit card can make a big difference. In Malaysia, look for:

• Low fees: Cards like Maybank 2 Gold or CIMB Cash Rebate Platinum have no annual fees.
• Low interest rates: Cards like HSBC Visa Platinum can save you money if you don’t pay your balance in full.
• Rewards: Some cards offer points or cashback for spending, like the Public Bank Visa Signature for dining and travel.
• Easy approval: If you’re new to credit, try cards like RHB Easy Debit.

For first-time credit card users, secured credit cards are also an option. These cards require a fixed deposit as collateral and are offered by banks like Alliance Bank and AmBank in Malaysia.

2. Use a Secured Credit Card

For individuals new to credit or looking to rebuild their credit in Malaysia, secured credit cards are an excellent starting point. These cards require a fixed deposit with the issuing bank, which acts as collateral and determines your credit limit. By using the card responsibly, you can steadily improve your credit score and gain access to more financial opportunities.

Features of Secured Credit Cards in Malaysia:

Collateral-Based Credit Limit:

• Your credit limit is usually equal to the fixed deposit amount. For example, a deposit of RM3,000 would set your credit limit at RM3,000.
• The deposit serves as security for the bank and may also earn interest, depending on the terms.

Beginner-Friendly:

• Secured credit cards are ideal for individuals with no prior credit history or those with a damaged credit profile looking to start afresh.

Boosts Credit Score:

Regular and on-time payments build your credit history. Positive payment behavior is reported to Malaysian credit bureaus such as CTOS and CCRIS, leading to gradual credit score improvements.

Top Secured Credit Card Options in Malaysia:

Alliance Bank Secured Credit Card:

• Tailored for those with limited or no credit history.
• Offers straightforward terms to help build financial discipline.

AmBank Secured Credit Card:

• Designed to assist individuals rebuilding their credit.
• Provides an accessible way to regain financial credibility while earning basic rewards.

Standard Chartered Bank Secured Credit Card:

• Available for individuals seeking to build or repair their credit profile.
• Offers competitive benefits, such as cashback or rewards, depending on the specific card product.

With Standard Chartered’s international presence, this option is particularly attractive for frequent travelers or those planning to expand their financial profile beyond Malaysia.

Apply here!

3. Limit Credit Applications to Protect Your Credit Score

Applying for multiple credit cards or loans within a short period can have a negative impact on your credit score. In Malaysia, each credit application triggers a hard inquiry on your credit report. While a single hard inquiry may only slightly lower your score, multiple inquiries in a short span can raise concerns among lenders about your financial stability and increase the risk of loan rejection.

Why Limiting Credit Applications is Important:

Hard Inquiries Lower Your Credit Score:

Every new credit application results in a hard inquiry, which stays on your credit report for up to 12 months. Too many inquiries can indicate financial stress to lenders.

Red Flags for Lenders:

Frequent credit applications suggest a higher dependency on credit, which may lead lenders to view you as a higher-risk borrower.

Temporary Score Impact:

Each hard inquiry can reduce your score slightly, but frequent applications amplify the cumulative effect, potentially delaying your financial goals.

4. Become an Authorized User to Boost Your Credit Score

For individuals with little or no credit history or those seeking to rebuild their credit, becoming an authorized user on someone else’s credit card can be a valuable strategy. This approach allows you to "piggyback" on the primary cardholder's good credit behavior, helping to improve your own credit score without taking on significant financial risks.

What Does It Mean to Be an Authorized User?

As an authorized user:

1. You’re Added to an Existing Credit Card:

• A family member or trusted friend includes your name on their credit card account.
• You receive your own card linked to the account but have no obligation to make payments.

2. You Benefit from Positive Credit History: The primary cardholder’s on-time payments and low credit utilization are reported to credit bureaus, positively impacting your credit profile.

3. Shared Responsibility: While you’re not responsible for payments, any late payments or high credit utilization by the primary cardholder can negatively affect your credit score.

5. Pay Bills on Time to Build and Maintain a Strong Credit Score 

Timely bill payment is the cornerstone of a good credit score. Payment history accounts for a significant portion of your credit score, and missing even a single payment can have long-lasting consequences. In Malaysia, late payments are reported to credit bureaus such as CCRIS (Central Credit Reference Information System) and can remain on your credit record for up to 12 months, negatively affecting your creditworthiness.

Why Paying Bills on Time Matters:

• Positive Impact on Credit Score: On-time payments demonstrate financial reliability and contribute significantly to your credit score.
• Avoid Negative Records: Late payments, even for small amounts, are flagged in CCRIS reports, which lenders use to assess your creditworthiness.
• Improves Loan and Credit Approvals: A clean payment history increases your chances of being approved for loans, credit cards, or mortgages with favorable terms.

 Bills That Affect Your Credit Record:

• Credit Card Payments: Late payments result in interest charges and a negative report to credit bureaus.
• Personal Loans and Car Loans: Missed installments impact your credit profile and can lead to penalties or legal action if unresolved.
• Utility Bills: While not directly reported to credit bureaus, unpaid utility bills can affect your financial reputation and lead to disconnection of services.
• Mortgage Payments: Delays in home loan payments are reported and significantly impact your credit profile.

6. Use Your Credit Card Wisely

To build your credit score, follow these tips:

• Always pay on time: Set reminders or use auto-pay to never miss a payment. Late payments are reported to CCRIS and hurt your score.
• Keep your balance low: Don’t use more than 30% of your credit limit. For example, if your limit is RM10,000, keep your spending under RM3,000.
• Pay more than the minimum: Try to pay your full balance each month to avoid high interest rates (15-18% per year in Malaysia).
• Don’t apply for too many cards: Too many applications can lower your score temporarily.
• Track your spending: Use banking apps like Maybank or CIMB to stay on top of your expenses.

7. Keep Your Credit Utilization Low to Improve Your Credit Score 

Credit utilization is a critical factor in determining your credit score. It refers to the percentage of your total credit limit that you’re currently using. Maintaining a low credit utilization rate, ideally below 30% to demonstrates responsible credit behavior and reassures lenders of your financial stability.

Why Low Credit Utilization is Important:

• Positive Impact on Credit Score: A low utilization rate indicates you’re not overly reliant on credit, which is a positive signal to lenders and credit bureaus like CTOS or CCRIS.
• Avoids the Appearance of Financial Strain: High utilization rates (e.g., above 50%) can suggest financial stress and make lenders less likely to approve future credit applications.
• Creditworthiness: Keeping your utilization low shows lenders you’re managing your credit effectively, increasing your chances of securing better interest rates and higher credit limits in the future.

8. Check Your CCRIS and CTOS Reports

You can monitor your credit health through:

• CCRIS: Run by Bank Negara Malaysia, it shows your loans, credit cards, and repayment history. It doesn’t give a score but shows how you handle credit.
• CTOS: A private company that gives you a credit score between 300 and 850. The higher the score, the better.

Get your CCRIS report through the eCCRIS portal or at Bank Negara branches. For CTOS, sign up online or use their app. Additionally, Experian Malaysia offers credit reports and scores, which can provide another perspective on your creditworthiness.

9. Fix Mistakes on Your Reports

If you find errors on your credit report, address them immediately. Common errors include:

• Loans or accounts that don’t belong to you.
• Incorrect payment statuses.
• Outdated or incomplete information.

To correct CCRIS issues, contact Bank Negara or your financial institution. For CTOS, use their online dispute resolution service. Under the Credit Reporting Agencies Act 2010, you have the right to dispute inaccuracies and have them corrected within 30 days.

10. Increase Your Credit Limit

Increasing your credit limit can help lower your credit utilization ratio, which is good for your credit score. You can do this in two ways:

• Request a credit limit increase: Contact your bank to request an increase on your current card. Malaysian banks like HSBC and Maybank may approve your request if you have a strong repayment history and stable income.
• Apply for a new credit card: Opening another card increases your total available credit. However, avoid applying for too many cards at once, as this can negatively impact your score.

For example, if your current credit limit is RM10,000 and you typically spend RM3,000, your utilization is 30%. By increasing your limit to RM15,000, the same RM3,000 usage would bring your utilization down to 20%.

11. Avoid Defaulted Accounts to Protect Your Credit Profile

Defaulted accounts occur when you fail to meet your repayment obligations over an extended period, leading to a breakdown in your financial relationship with the creditor. In Malaysia, defaults are flagged in your credit report and can remain visible for up to seven years, severely damaging your credit score and making it difficult to secure new loans, credit cards, or even a mortgage.

What Are Defaulted Accounts?

• An account is considered defaulted when you have missed several consecutive payments, typically beyond 90 days, and the creditor considers the debt uncollectible without legal action.
• Credit card debts, personal loans, car loans, and even utility bills can lead to defaults if left unpaid.

Why Avoiding Defaulted Accounts is Crucial:

• Severe Impact on Credit Score: A defaulted account is one of the most damaging entries on a credit report, significantly lowering your score.
• Difficulty in Securing Credit: Lenders view defaulted accounts as a sign of financial irresponsibility, often rejecting applications for new credit.
• Legal Consequences: Creditors may take legal action to recover unpaid amounts, leading to further financial stress and potential blacklisting.
• Higher Costs for Future Credit: If you’re approved for credit after a default, expect higher interest rates and stricter terms.

Building a good credit score takes time and discipline. Pay bills on time, monitor your credit reports, and use credit cards responsibly. With a strong credit score, you can secure better home loan terms and achieve your property ownership dreams. Start today to take control of your financial future!

Other Article:

• What Are The Average Property Prices Across Malaysia?
• The Pros and Cons of Debt Consolidation: What You Need to Know
• 5 Steps on How to Apply for a Housing Loan in Malaysia