Credit scoring is a statistical and behavioural analysis performed by a lender; credit companies or financial institutions on their borrower’s creditworthiness. The credit score result will determine the outcome of a loan application. It gives a great implication to your loan application, such as; mortgage, automotive financing, credit card, personal loan and etc.


A credit score mechanism can be different from one lender to another, but it has the common categories and characteristics, ranking the borrower’s risk from higher to lower. In short, the lenders will always reckon the highest credit score point or lower risk customers in their loan portfolio.


How to build a good credit score? Its always begin with ourselves, our discipline in dealing with finances. The credit standing may deteriorate when the financial commitment is getting higher and cause the delay of loan repayment. In worst case scenario, the borrower may end up with bankruptcy.

The lenders may shut it doors and access to new credit facilities is tougher.


Once the borrower is in bad credit standing, it takes a longer time to re-build a better credit score. More income needed to meet the fixed obligations or pare down the loan by dispose off the asset and re-schedule the loan.


There are few things that a smart consumer does to ensure the financial stability;


  • Pre plan monthly expenses.

§  Pre-plan the monthly expenses will be the best practice in every household, avoid spending on unnecessary, keep expenses check.


  • Level of loan commitment.

§  The ability to service the loan is crucial. The lenders are checking the debts service ratio and the net disposable income in assessing borrower financial position. The lenders will not grant further loan if the debts service ratio is high. So, always know our repayment ability before deciding for a new loan.


  •  Insurance.

§  It gives protection to our assets and loves one. Any damage and illness will cost you to certain extend. Now, some of the insurance coverage comes with return on investment.


  • Saving.

§  Save whenever it can. If you have cash set a side for emergencies, you have a fallback should something happen unexpected.



The credit scoring mechanism has evolved intensely with the new financial technology and electronic payment methods, which may project higher accuracy in scoring.