Most of us have heard that having a healthy credit score is important for our financial future - especially when you’re applying for a credit card or a loan. But how exactly can it help with your credit applications and how far can it help you in life?
Wait, What is Considered as Healthy Credit Score?
Different banks and lenders use different types of credit score, but in general, a good credit score ranges between 650 to 750. Having a credit score of between 751 to 850 (the highest score) is considered exceptionally good to most banks and lenders.
If your credit score is not within the abovementioned range, it’s never too late to change your financial habits you boost your credit score. You can start by making your bill payments on time and pay down your debt as soon as you can. If you have a credit card, keep a close watch on your credit card balances and avoid maxing it out as it may hurt your credit score.
You should also watch out for any fraudulent activity under your name. Check your credit report regularly to ensure all your personal details are correct and updated, and make sure all the recorded financial activities under your name are the ones that you have authorised.
Perhaps not many of you realise this, but having a healthy credit score can create a positive ripple effect on countless aspects of your life - far beyond getting your credit card application approved. Here’s a closer look at some of the perks and benefits of having a healthy credit score:
1. Higher Credit Card and Loan Approval Chances
A bad credit score would indicate a poor payment record, and few (if any) banks and lenders would take the risk to do business with you if your credit score is on the low side.
Having a healthy credit score shows that you are responsible and diligent about paying your bills, which significantly lower your risks as a borrower. Always remember; the lower your risks are, the more likely it is for banks and lenders to approve your credit applications.
2. Faster Credit Approval
No one likes to wait a long time when making a credit application - after all, you need the money for a reason, right? Your credit score can either speed up or slow down the approval process; the higher your credit scores are, the faster the banks and lenders will decide to lend you money.
If you have an average to low credit score, your credit application may have to go through more channels and departments to get it approved - which means you’ll have to wait longer than you would have if you had a healthier credit score.
3. Save Money on Interest Rates
Whether it’s a credit card or a loan, having a higher interest rate would mean paying more money to the bank or lender - which is hardly good for your finances. Your credit score plays a role in determining your interest rate, so work on keeping your credit score high to enjoy a lower interest rate.
It’s worth noting that in the past, few - if any - banks and lenders in Malaysia would consider revising interest rates based on your credit score. However, more and more banks are now looking into devising tiered interest rates based on credit scores. So, it’s better to improve on your credit score now so you can enjoy the benefit of having a lower interest rate on credit cards and loans soon!
4. Better Negotiating Power
With a high credit score, you don’t be shy to negotiate the terms when you’re applying for a new loan or credit card. The banks and lenders can see that you’re capable of paying them back in a timely and consistent manner from your credit history, so use it as a leverage to negotiate a lower interest rate or a better repayment plan.
5. Better Chance to Get Higher Credit Limits
Banks and lenders will look at your income and credit score before approving your credit applications, so the amount of money you can borrow depends on how much you earn. But, one of the major perks of having a healthy credit score is that it’s easier for a bank or a lender to trust you with a higher credit limit.
A healthy credit score can speak volumes about your ability to repay your bills on time. So, you can use it to your advantage on those occasions when you need a one-time or a permanent credit limit increase.
6. Buy a Smartphone on Contract Without a Deposit
Plenty of telecommunications companies in Malaysia offer smartphone contract plans with zero deposit or interest rate. But, these plans aren’t available to just everyone. These companies will usually look into your credit history before approving a smartphone contract application. So, if you have a bad credit score, you may be asked to put down a security deposit - or worse, they might refuse your smartphone contract application and offer you a prepaid plan instead.
On the contrary, you get to save more by simply having a healthy credit score. Telecommunications companies tend to offer perks such as zero deposit or discounts when you sign up for a smartphone contract.
7. Get Approved for Instalment Plans at Appliances or Furniture Stores
Thinking of revamping your home decor? Appliances and furniture stores around Malaysia often offer instalment payment plans when you purchase from them, especially when you’re making a big purchase.
However, major appliances and furniture stores will look at your credit score before approving your instalment payment plan application - after all, they need to know that you can pay them before they’ll let you take their merchandise home. A good credit score may even qualify you for low-interest or interest-free instalment plans, depending on the stores and their ongoing promotions.
Having a bad credit doesn’t mean you can’t shop at these stores, it just means that you’ll have to pay in full when you make your purchases instead of being able to enjoy the benefit of instalment plans.
8. Access to Better Credit Card Deals
The best credit cards that come with attractive perks such as zero annual fees, low interest rates, and high rewards and cashback don’t just require a high income - you’ll also need a high credit score to qualify for them.
These exclusive credit cards don’t just give you access to lower interest rates and fees, they’re also often accompanied with great privileges such as better reward programmes, complimentary admissions to Plaza Premium Lounges at airports, higher credit limit, and discounts at selected merchants. What’s more, if you stick to your credit-savvy habits and keep a good payment history, the bank may be more willing to approve larger loans (such as a home loan or a car loan) for you in the future!
9. Enjoy a Less Stressful Life
The benefits of having a healthy credit score go beyond your financial life - it can help you live a happier, less stressful life. It’s a lot easier to relax and focus on building your career and life when you don’t have to constantly worry about money or be bogged down by bad credit.
For instance, certain jobs and companies will perform a credit check on you before giving you an offer letter - especially when you’re applying for jobs in the financial industry.
In the same way, it could also have an impact on your married life. Say for example you are tying the knot and are now looking to get a home loan together, your credit (or your future spouse’s credit) might be the difference between a low-interest and affordable and a high-interest home loan - that is if you can qualify for a home loan at all.
10. Earn Bragging Rights
By bragging rights, we don’t mean you should shout about your credit score to everyone within earshot, but having a healthy credit score IS something to be proud of. You’ve worked hard to pay your bills on time and keep a good credit record, so you deserve to feel good about yourself. Besides, you might inspire others to be more financial-savvy and work to improve on their credit score as well!
How Do I Check My Credit Score?
There are a few ways for you to get your credit report and credit score in Malaysia, but the easiest and fastest method would be to visit CTOS and sign up for a CTOS User ID online or via their mobile app.
If you aren’t familiar with CTOS, it’s a credit reporting agency that helps to compile and provide credit information in Malaysia. It offers MyCTOS Score report - a comprehensive credit report that can help you understand your credit health better and help identify the areas of which you need to work on to improve your creditworthiness.
A MyCTOS Score report contains your personal details, CCRIS records, directorships, legal action records, the number of times you’ve been searched, as well as your CTOS Score - a credit score that ranges between 300 (lowest) and 850 (highest). It’s a great way to monitor your credit health, and you can easily sign up to get your MyCTOS Score report online or through CTOS mobile app.
You can find out more about MyCTOS Score report and sign up for your CTOS User ID at www.ctoscredit.com.my. Have you gotten your MyCTOS Score report before? Did it help you understand your credit health better? Share your thoughts and experience with us in the comment section below!