The year end is the time most people seek to 'start over' with resolutions to gain better health; clearer insight; meet financial goals and pave the way for an improved state of being. If one of your resolutions includes cleaning up your credit rating; we can help.
What is a credit rating and how does this work?
Your credit rating may be calculated in different ways in other countries but in Malaysia, it's not so much a rating but a spreadsheet of all your loans and payment behaviour. Contrary to popular belief; there isn't 'blacklist' in Bank Negara that carries your name but you can be certain that if your payment history is less than impressive; you won't get approved for loans as these payment misdemeanours will be clearly visible on your credit history sheet.
Our article on 'blacklisting' explains this in detail but the important thing you need to note is that to have a neat and attractive credit report to banks and other financiers; you need to be consistently good with payment for at least 12 months. That's a whole year of paying in full and on time.
What do you need to do to get your credit report looking good?
As mentioned above, what you need to do is pay off all your loan installments and credit card dues on time and diligently every month for at least 12 months. You must also repay all outstanding amounts. In other words; all your payments need to be up-to-date and in order. It's of course a lot easier said that done. Here are some ways you can tackle your monthly bill payment to keep that credit sheet looking good all the time.
- Set up a standing instruction or reminder. For many people, the reason they miss payments is not because they deliberately want to but because they simply forget to pay when they should. This often happens when you're billed at different times in a month. It can be hard to keep track. For some, having a standing instruction set to pay off the amount owed is helpful as you don't even have to remember to do anything - the bank does it all for you. But if you are reluctant to pay the RM2 per transaction standing instruction fee (and whatever other IBG charge there is); why not simply set up reminders in your phone to go off at least 2 days before every bill is due?
- Consolidate debt. Sometimes it's possible that the reason you cannot meet your payments is because you have too many of them and too little income. Consolidating your loans means you pay only one (or two) loan amounts every month, freeing up more cash for use. This is also a good idea if you are using your entire salary for repayments and then turn to your credit cards for monthly necessities, perpetuating the cycle of debt.
- Renegotiate loans and payment deadlines with banks or AKPK. If your loans have become too much to bear or if you find you have an outstanding amount that you cannot settle in a short period of time; negotiating with your bank may yield positive results. You may ask for an internal consolidation loan or a restructuring. Even if your bank refuses; you can then opt to contact AKPK for their assistance in restructuring debt.
- Reduce the number of credit cards you own. If you're able to pay off any one of your credit cards in full; be quick to cut them up. Credit cards can be useful but they can also encourage you to spend more money that you don't have. The more cards you own; the higher the risk of racking up multiple debt.
So there you have it! Four ways (not so easy though!) to clear and restart your credit rating in 2015.