PETALING JAYA: While most Malaysians will be able to qualify for a wide range of credit products, they may not be getting the best deals on the market.
This is due to their average credit score, which remains below the range of “good to excellent”, credit reporting agency CTOS Digital Bhd said.
A study conducted by CTOS, in collaboration with Monash University Malaysia School of Business, found that the average credit score of Malaysian consumers stood at 678 points in 2022.
That was an improvement from the national average of 675 points in 2021 and 663 points in 2020, according to the study which was based on a sample of over 1.4 million individual CTOS users last year.
And despite the improvement amid the continued economic challenges from the Covid-19 pandemic, the average credit score remained within the range of “fair”, which made it viable for credit applications.
“While generally, a score of 678 means that most Malaysians will be able to qualify for financial products at some degree depending on the risk appetite of each lender, they may not get the best credit deals on the market as compared to those with ‘good to excellent’ credit scores,” CTOS said in a statement in conjunction with the release of the summary of CTOS State of Consumers Credit Report for Malaysia 2022.
It noted that a “good” credit range would start from 697 points.
So, in comparison with other countries on the global stage, Malaysia still had some way to go. The United States, for example, had an average credit score of 716 points, it pointed out.
The CTOS score is a three-digit number, ranging from 300 to 850, that represents a consumer’s creditworthiness based on the individual’s payment and management of his or her credit. The higher the score, the higher the chances of securing credit.
In a note of caution, CTOS pointed out that its study found 28.3% of Malaysian consumers had fallen below the “fair” rating.
Such rating would make it difficult for the consumers to obtain credit from the mainstream lenders, putting them at risk of falling prey to illegal lenders that often provide credit with exorbitant interest rates.
“This means that financial education is still crucial for over a quarter of consumers in Malaysia, while the importance of maintaining financial health is a factor for the remaining population,” it stressed.
By age group, the study found that the silent generation (aged 77-94 years) in Malaysia continued to have the best credit score at 737 points last year, albeit a decline from 739 in 2021.
Conversely, the Generation X (aged 42-57 years) continued to have the lowest credit score at 675 points last year, despite the significant improvement of 19 points from 656 in 2020.
Meanwhile, the baby boomers (aged 58-76 years) had a credit score of 699 points, while Generation Y (aged 26-41 years) and Generation Z (aged below 25 years) scored 678 and 676 points, respectively, in 2022.
Separately, the study found that credit card utilisation among Malaysian consumers remained around a steady rate of 24% last year. This demonstrated that consumers in general did not have to increase unsecured credit spending to survive the difficult period due to the fallout from the Covid-19 pandemic, CTOS said.
However, the study also revealed that the bottom 40% of low-income earners (B40) group had a higher dependency on credit card to sustain their finances during the difficult times as compared to other income groups. The credit utilisation rate among B40 household stood at 34.2% last year, considerably higher than the national average of 23.7%.Credit cards were the most used credit facility last year, with an average of 2.17 cards per person and an average outstanding balance of RM11,955 per person.
