Your Credit Score

In America, the use of credit scores is not only concentrating on financing, it is now expanding to other industries like insurance etc. In Malaysia and other developing countries, credit scores are still a mystery among lay people. Do you know how your application for housing or car loan is being processed? Did you ever wonder why some banks or finance institution refuse you or offer you a lesser deal than the next customer? It all has to do with your credit score.

Credit Agencies collate information on individual credit history and compile them according to their own way of calculation to determine your credit score. This information is then made available to all finance institution to check when a customer request for a loan. Most bankers have online facilities with these credit agencies. The interest rate to impose and the overall limit you will be entitled will very much depend on your personal credit history.

The first thing you need to understand is how your credit score is determined. In America, general information is available from Fair Isaac, although the exact algorithm used to determine your credit score is a secret closely guarded by each credit agency. In fact you can go online to check your own credit score to assess the accuracy of the information about your personal credit history.

In Malaysia, every applications for loan would now be subjected to a financial rating system based on Bank Negara’s Central Credit Reference Information System (CCRIS) and two other private credit reference agencies – Credit Tip Off Service Sdn Bhd (CTOS) and Financial Information System (FIS) Sdn Bhd.

CTOS and FIS provide details of the individual’s credit standing with other banks, while CCRIS tracks the person’s spending patterns and habits, repayment patterns, credit card and other electronic transaction records in the last 10 to 20 years.

It sounds spooky isn’t it?? If you are first time reading about this, it is, but if you think about it, there is a need for such control otherwise as a business person you will not know if you are doing business with a con business or a genuine one.