What is a credit score, why it’s important, and how to improve it

We’ve all heard how important it is to have a good credit score. However, if you’re new to managing your finances you’re probably confused about what this means. Contrary to popular belief, a high score isn’t about having the most credit card expenses, though how you manage those expenses certainly plays a part. 

In this guide, we’ll define what a credit score is, why it’s essential for your financial future, and how you can improve yours using CTOS to check your credit report within TNG eWallet. 

What is a credit score? 

A credit score is a three-digit number that assesses your creditworthiness. It tells banks and lenders how likely you are to repay a loan on time. Those with a good credit score are more likely to enjoy fast loan approvals and better interest rates.  

What affects your credit score? 

Your score is calculated based on your credit history, specifically looking at: 

• Your loan repayment record: This shows, within your credit report, how consistently you pay your bills or loans on time. Delays of days, weeks, or months will negatively impact your score. 

•  Amounts owed:  This looks at how much debt you have relative to your total credit limits. 

• Length of credit history: A longer track record of responsible borrowing makes you less of a risk to banks. 

• Types of credit: Having a good mix of credit such as car loans or mortgage can be a good indicator to lenders that you know how to manage different types of credit.  

• New credit: Making too many credit applications in a short window can signal financial stress, which may lower your score. 

How often should I check my credit score? 

Checking your credit score every 3 to 6 months is the best way to maintain a healthy credit profile. It allows you to track your progress and quickly resolve any inaccuracies before they affect your next loan application. 

What’s considered a good credit score? 

A good credit score typically falls between 697 to 850. Scores between 651 to 696 are generally considered average and may still be acceptable when applying for a loan. However, if your score falls between 300 to 650, you may face difficulties getting loan approvals.  

Note: This rating is based on the CTOS metric. Credit score ranges may differ depending on the service provider or financial institution. 

How to improve your credit score  

If your score isn’t where you want it to be, follow these steps to rebuild your credit health: 

Pay your bills on time 

It’s ideal to have a minimum of 6 months’ worth of on-time payments to see an improvement in your credit score. If you’re having a hard time remembering when to pay, set up an autopay system to ensure you never miss a payment. 

Using TNG eWallet, you can quickly find your biller under the ‘Bills’ section and pay in seconds. Those worried about forgetting due dates can easily set up a recurring Auto Payment by clicking on ‘Schedule Now’ to manage bills automatically. 

Lower your outstanding debt 

Having high levels of remaining debt can potentially reflect poorly on your credit score. Focus on paying off your debts one by one, starting with those that carry the highest interest rates. You may also consider a personal loan to consolidate multiple debts into one, making repayments more manageable and potentially reducing interest costs.  

Reduce your credit utilisation rate 

Your credit utilisation rate refers to the percentage of available credit you’re using across credit card and other credit facilities. Keeping this percentage low can improve your credit score. A high credit utilisation rate may suggest poor credit management, which can cause lenders to view you as higher risk.  

Don’t close unused credit card accounts 

Avoid closing credit card accounts, even if they’re no longer in use. Doing so can erase the credit history tied to that card. While this may remove negative records, it also removes the good credit history too, which can hurt your credit health.  

To calculate your credit utilisation rate, divide the total amount you owe on all credit cards by your total credit limit, then multiply it by 100. It’s ideal to keep this below 25% for a healthier credit score.  

How to check your credit score from your eWallet 

Monitoring your progress is easy. You can check your CTOS credit score directly within TNG eWallet: 

1. Navigate to the GOfinance feature. 

1. Register for a CTOS ID. 

1. Follow the prompts for verification. Your report is usually available within 30 minutes of registration. 

Rates start from RM27.90/report and includes: 

• CTOS score 

• Central Credit Reference Information System(CCRIS) Records: Shows repayment history over the past 12 months for loans from financial institutions. 

• Dishonoured Cheque Information System (DCHEQS): Tracks any bounced cheque records within 12 months. 

• Rewards from listed partners: Earn exclusive benefits for maintaining a healthy score. 

There’s also a free MyCTOS Basic Report option available through the CTOS website, but please note that it provides a limited overview and does not include your actual credit score or detailed CCRIS records. 

Build better financial habits today 

Understanding what a credit score is the first step toward better financial health. By tracking expenses, reducing debt, and paying bills on time, you can steadily work toward a stronger credit profile. 

Ready to take the next step in your financial journey? Check out our guide on how to invest for retirement in Malaysia to start growing your wealth. 

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Cover Image credit: CTOS