What happens when you have a bad credit score?



Credit scores are a buzz all over the media in other countries. However, some Malaysians have not grasped the importance and understanding of the various credit ranges and how they affect their finances.

Your credit score is an aggregate representation of your overall credit score comprising of 3 numbers that falls into different ranges. This score is derived from your credit report, a document that summaries your overall debts and payment history and is readily available to you through CCRIS and CTOS. Bankers and Creditors use this score to estimate the risk of you defaulting on the loan that you are applying for.

Your credit card application gets rejected

Using a credit card comes along with great discipline and control of your personal finances. Banks are hesitant to sign you up if they feel that you might have a bad payment record. With high monthly interest rates, your probability of paying back the loan is weighed into consideration against the odds. Hence, having a good credit record will most likely get your application approved…. in a nick of time.

Slow approval of credit

When applying for a loan or credit, speed is of the essence. Are you awaiting the approval for your loan while in the SPA process? Do you currently need some funds on your upcoming business startup? A low credit score would mean a longer time frame. The bank officer has to make additional considerations, deeper scrutiny on your application or meeting with relevant parties before finally deciding to approve your application.

Unfavourable credit packages

A higher risk would mean a high risk individual to the bank. To protect themselves, they would need a higher return on interest when offering you one. Accepting a credit package with a higher interest rate is no joke, your overall financial health will drown under the compounding effect working against you.

Some banks offer an interest rate tiers based on your credit score. This helps the bank to standardise the loan process, but it leaves little room for negotiation if the loan amount is not up to your requirements. Bankers are more likely to offer you better rates and benefits if there is a lower risk on them.

Additionally, one factor that many applicants look for in a credit card is the monthly credit limit. When signing up for one,a low credit score screams aversion towards the credit card issuer. Less trust on your credit health may mean a lower limit for you to spend monthly.

Low negotiating power

When negotiating for a new loan, a low credit score leaves you limited choices and rates. Banks are sceptical with your ability to repay the loan and they may feel that they have little to gain from offering you a loan. Thus, a higher credit score may give you more bargaining power when dealing with your banker.

Low credit card deals

A low credit score may mean a high risk client to the bank. In any case, they may be reluctant to offer you a better rate on your credit card application. Unlike premium credit card packed with rewards and attractive rates, you may be offered a basic deal with high interest rates and annual fees. A better credit score will provide perks that are only reserved for those with an excellent credit history.

Stress and unrest in your family

Research has shown that many divorces stems from money issues. Without proper financial management, families can be separated, loved ones becoming enemies and crumbling long time partnerships. Be sure to contemplate over your partner’s spending habits and borrowing behaviour before even considering marriage.

Moreover, having many obstacles on obtaining credit can be disheartening. Many people are forced to get money through illegal means such as loan sharks and unlicensed creditors.

Another thing you should know is that Banks and financial institutions take into consideration your partner’s salary, his/her credit score and even assets. Despite being separate individual profiles, they become a consideration when applying for a home loan or a car loan. If the joint account between you and your spouse accumulated some bad credit. The banks will view the overall finances and may impose a higher interest rate.


As pointed above, the credit score stands on a fine line between an opportunity or a setback. It can make or break a financial decision, leaving you in a rut or providing leverage on a new mortgage. If your credit score is not as up to your expectations, start taking baby steps towards getting a good credit score. Soon enough, you will reach your financial goals with persistence.

Do you know how to check your credit score? We have a tutorial to help you with that.

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