If you’ve started working in the city, you’d know that your monthly rent is one of the most crucial bills. You’ll have to make sure that you pay the rent on time for each month, or you might face some severe consequences. However, before you decide to rent a room, there’s one thing you need to know about – your credit score.
For today’s article, we will be keeping you informed on what a credit score is all about and how room renting can affect your credit score in Malaysia. Read on to find out more!
What is a Credit Score?
A credit score is a numerical representation of your credit risk; your creditworthiness and your probability in repaying debt. A credit score is in a three-digit number, using a scale from 300 to 850. With this, it eases the job of lenders and banks in analysing your application for loans or credit. If you have a credit score above 700, you’ll have a good chance of getting approval from your lenders.
The Importance of Credit Score
Some might be wondering – why is it so important? Well, as to what we mentioned, credit score or credit rating represents your creditworthiness. Hence, it plays an important part when you’re planning to apply for a financial product. This includes applying from a bank for loan mortgage, credit card or car loan.
In simpler words, your credit rating helps to reassure the other party about the risks they might face once they lend money to you. With a higher credit rating, it indicates a lower risk level for the lender – making it easier for your loan to get approval. Similarly, in the renting world; the higher your credit rating, the higher are the chances for you to be viewed favourably by landlords.
Therefore, before you decide to rent a room; bear in mind that your landlord may check on your credit rating beforehand. Thus, it is vital for you to always monitor and keep it in check. This way, landlords will gain their trusts in you – confident that you’ll be able to pay your rent on time. As a property management company, Rumah-i runs credit checks on potential tenants to give landlords confidence in renting out to trusted tenants.
Although different credit agencies have different methods in analysing someone’s credit score; here are the general factors which can affect it:
- Length of your credit history
- Your payment history (whether you’ve paid your loans on time or any missed payments)
- Types of credit you hold (secured and unsecured credit)
- Amount of credit that you owe (the amount you owe to the banks and number of credit facilities)
- Approval of new credit recently
If you would like to check your credit score, you can do so at any Credit Reporting Agencies. In Malaysia, there are three top Credit Reporting Agencies (CRAs). These CRAs are registered to the Registrar Office of Credit Reporting Agencies and also governed under the Credit Reporting Agencies Act 2010. Here are the CRAs:
- CTOS Data Systems
- RAM Credit Information (RAMCI)
- Credit Bureau by Bank Negara Malaysia
How Room Renting Affects Your Credit Score
Now that you know how important it is – one question remains unanswered. Does room renting affect credit score in Malaysia? In terms of improving the score; it’s a yes and no. However, in terms of deteriorating it – yes it does but it is avoidable.
Although it is possible to improve your credit score through your room rentals, it’s not as easy as it sounds. To find out whether you’ll get rental payments reported on your credit reports, it all depends on who you rent with. If you’re renting with an individual landlord or with a small company, it’s doubtful that your rents are reported. But if you’re renting with a big company, it is reported to the credit bureaus. Ensure that you ask your landlord about this beforehand.
Now, moving onto the downside. Unfortunately, room renting can deteriorate your credit score – but it is avoidable. If you are late in paying your rents, get evicted, break your lease or not pay for your move out fees; it will worsen your score. Your landlord has the rights to report all of these to the credit bureau. Thus, avoid those actions to ensure that your credit score won’t get hurt.
We hope that with this article, you now have a clear picture of what a credit score is; and also how room renting can affect your score in Malaysia. At Rumah-i, we assess and screen potential tenants using RAM Credit Information (RAMCI) for assurance of credibility. This is part of our endeavour to create a trustworthy and happy community between tenants and landlords. Find out more about our services and approach by reaching out to us!
