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Advice for young Malaysians: adulting is all about financial responsibilities.

While credit card, for instance, is important to build up credit score, there is a fiscal danger to this “magical” piece of plastic. Credits—personal loans, credit cards, etc.—can be a blessing or a curse, it can help or it can hurt. Like a hammer, you can drive in more nails with it, but you can also injure yourself if you aren’t paying attention.

So what should you do as a responsible credit owner?



This is one of the most important habits to justify your capability as a good paymaster to the credit agencies and banks. By timely paying your monthly debt repayment, your credit score will be clean due to your fiscal discipline. You will stand a chance of getting better loans with better interest rate for that better, more expensive house you have eyes on.

Being chronically late on your bill payments can damage your credit score. Banks will be extremely concerned about your debt repayment history especially if you have developed a habit of late payments, giving them the automatic impression that you’ll likely be late on their loan payments as well.

So the best way to deal with that bill is to pay in full by the due date in order to avoid extra fees or, worse, bad credit.

2. Don’t carry a balance

A credit card, for instance, is an unsecured loan. If you don’t pay off your card every month, you will have to pay interest on the amount you owe. This might seems minor initially but after a while, your amount will accumulate due to the interest rate. When you only pay a minimum amount, it means you always owe money to your creditor.

So advisedly, you better pay as you go. Let’s say you swipe your card for your weekend shopping that cost you RM399. By the end of the billing month, you should immediately pay it off to clear your balance. While this strategy may not affect your credit, it does make you a responsible credit owner.

3. Don’t max out credit card


The rule is to never spend too much of your available balance. To keep your credit score as buoyant as possible, don’t spend more than 20%–30% of your available credit card limit. Credit issuers don’t look kindly on borrowers who max out their cards each month, even if they pay them off in full. It tells them that the borrowers are always at the edge of your finances. It defames the credit score and makes it look less attractive.

4. Prioritise debts with the highest interest

Let’s say you can’t avoid having more than one credit. You should always try to clear your debts with the highest interest charges first, in order to minimise your cost.

Credit card debt is usually the credit with the highest interest (18% per annum), followed by a personal loan. Clear the card first. If you have more than one credit card, you should identify the total amount of debt and interest rate charged on each card and work towards paying off the card with the highest interest rate first, then move on to the next card.

Ultimately, you should clear off as many debts as you can and make sure your debt service ratio is below 50%. With that, you should be able to secure a good credit score.

5. Don’t apply for too many loans


Applying too much credit will actually hurt your credit score. The practice of aggressive and continuous loan and credit applications may indicate desperation to obtain funds.

Whenever a credit issuer checks your credit report, an inquiry is placed on your credit report to show that someone has checked your credit. Ten percent of your credit score is based on the number of “hard” inquiries into your credit history within the past 12 months (“soft” inquiries, such as checking your own credit history, doesn’t count).

Since new applications for credit is 10% of your credit score, simple math indicates your credit score could stand to fall as much as 70 points if you have a 700 credit score.

6. Don’t cover your loan with another loan

Well, what do you do when you max out your credit and now the financial institution is gunning after you? Don’t panic, but also never ever apply for another credit to settle your overdue credit.

Taking a loan to repay a loan might sound like a good short-term solution to your mounting debt woes. However, applying for more credits will only raise the devil by giving the banks more reasons to go after you. It shows to the banks that you are desperate for money, and a sign that you will not be able to repay your credit card or loan amount. Even the loans you’ll get will be with a higher interest rate, which means more debts to deal with.

7. What if you can’t pay in full?


In the worst case scenario, avoid defaulting on your debts if you are struggling to pay the minimum. Contact your lender to re-organise your repayment schedule. Be honest and upfront with them. Not paying at all—or waiting until after the due date will result in major damage to your credit score. One missed payment could be up to 100 points off your credit score. And please never ever ignore the calls from the bank. It’s hard but quitting (and hiding) isn’t an option.

8. Contact credit counsellors


Credit counsellors such as Debt Management and Counselling Agency (AKPK) is always in the front line to help to resolve your debt problems. The agency provides debtors with an opportunity to negotiate a debt repayment plan and to avoid being blacklisted.

This rescue mechanism acts as a ‘second chance’ for borrowers to regain control of their finances and to disseminate knowledge in prudent financial management to help people better manage their finances. AKPK can discuss with the borrower on ways to manage the borrower’s cash and assets, plan a budget and manage debts effectively and invest in secured saving and investing schemes.

So, next time if you are in your financial turmoil, just swerve to AKPK.

Borrow responsibly

Credits are only dangerous when used irresponsibly. If you handle them well, they provide a lot of advantages and can even make life less expensive. Choose the right loans, use it well and you won’t have to worry about ending up in the workhouse.

With all the tips, you are on your way to be a responsible credit owner. So, are you ready to apply your loan now?

Share with us your thoughts or your experience.

(By Elmia Kayok)


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well shared. Thanks alot.

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@admin_ps thank you for sharing