Millennials have been perceived by many as the generation that are most financially unhealthy, and tend to apply for more credit than they can afford. But this perception may need to be debunked soon as they are showcasing strong credit scores compared with those of other age groups, according to data collected by credit reporting agency RAM Credit Information (RAMCI) in partnership with Perbadanan PR1MA and Rumah SelangorKu affordable housing schemes.
RAMCI says of the total applicants of the affordable housing schemes during the Perbadanan PR1MA and Rumah SelangorKu roadshows, 66% were made up of millennials. Of this group, 44% (2,364) and 30% (1,617) showcased strong and good credit scores respectively. The company grades consumers’ risk in four bands — weak, fair, good and strong.
This data indicates that Malaysian millennials are now more aware of the importance of building and managing a healthy credit score, says Zuraidah Ahmad, RAMCI’s senior manager and head of consumer and trade bureau.
“From the data, we can conclude that the millennials who came forward during the roadshow to take the opportunity to purchase the houses do have a good understanding of keeping healthy credit scores.
“More than 70% of this group either have a strong or good credit score — this debunks the whole myth about millennials not being able to manage their finances appropriately. It is a good improvement from last year, as only 34% of the millennials recorded a strong credit score,” says Zuraidah.
She adds that as the property prices keep on increasing, millennials are looking for schemes such as PR1MA and Rumah SelangorKu to buy their first homes.
Knowing that these schemes will attract the younger population,
RAMCI, as the credit reporting agency, has set up a station at the roadshows allowing registrants to pull their own credit report and assess their eligibility to apply for loans.
“What we are trying to do is actually to make sure that they know what their credit strength is, how to understand the score, and how to maintain it. We believe in the importance of imparting this knowledge to the youths, which is why we chose to do it at roadshows,” says Zuraidah.
While more than half of the registrants are those aged 25 to 34, there are also those from the age group of 21 to 24 (8%), 35 to 44 (20%), 45 to 54 (5%), and above 55 (1%).
Of the 1,618 registrants of the 35-to-44 age category, only about 30% achieved strong credit scores. Zuraidah explains that this is probably due to the fact that the individuals in this age category are adding to their commitments.
“They are currently taking on multiple credits and are adding on more over the years. This includes their current housing loan, second car loan, and loans for their children’s education. Although it is understandable, this category should not compromise their credit scores by not paying their debts on time,” says Zuraidah.
The affordable housing schemes are for those eligible to purchase houses valued between RM100,000 and RM400,000. The data was compiled from roadshows mainly done in Kuala Lumpur, Selangor, Johor Baru and Negeri Sembilan from September 2016 to February 2017.
Benefits of a healthy credit score
As one of the licensed credit reporting agencies in Malaysia, RAMCI strives to increase awareness of keeping a healthy credit score among Malaysians. Over the years, the company observed that there is a misconception among the consumers of how the scores are calculated and achieved.
“The reports come with probability of default range for each score category band, therefore typically consumers will ask us why they are not graded better. They thought the fact that they can afford owning five cars would mean that their credit scoring should be strong. This is wrong — where one stands in their credit report does not depend on their number of assets. Rather, it actually depends on their payment discipline,” says Zuraidah.
She adds that consumers also have the wrong perception that the credit reporting agencies are the ones responsible for determining their eligibility to obtain a loan. “Our role is only to report the consumer’s data. Whether the loan is extended to the consumer or not is not our call, it is actually entirely up to the creditor,” says Zuraidah.
Currently, RAMCI recommends consumers get their full credit report every three months to constantly assess their credit standing. Zuraidah says by checking their credit report from time to time, consumers can be informed of where they stand financially, what areas to improve on, and ensure that their identity has not been stolen by another party.
“While it is not a common occurrence, we do see that it is on the rise, especially in this cyber age — sometimes the consumers notify us that there is a loan in their report that they had never made. If you are able to detect this malicious activity early, you can directly report to the authorities and take action to prevent it from happening again. This is why we also have a monitoring system which triggers the consumers every time their IC is used to apply for new loans,” says Zuraidah.
Other benefits for those with strong credit reports is the opportunity to be offered a lower interest rate on their loans, longer credit terms, and other perks from the financial institutions. Additionally, Zuraidah says some employers, especially for occupations that handle large amounts of cash on a daily basis, assess their future employees’ credit score to determine whether they are suitable for the job.
To date, RAMCI has scored more than 500,000 individual consumers. Each credit report costs RM10 and can be applied online at its official website.