Consumers Maintain Credit Scores In Spite Of Challenging Times; Experian

Experian Information Services (Malaysia) today released its i-SCORE analysis which outlines the credit score trends and credit facility trends of Malaysians for the period 2019-2022. Experian i-SCORE is a consumer credit score in Malaysia, which is based on the statistical analysis of a consumer’s credit files to derive a numerical score ranging from 300 to 800. These credit scores are frequently used by banks in their retail decisioning and portfolio management to assess an individual’s credit worthiness and risk assessment where a higher score indicates a lower credit risk to lenders.

Twenty twenty-two (2022) has been a year of recovery for most Malaysians with the country transitioning into the endemic phase and the re-opening of international borders are shoring up consumer sentiment. This is reflected by the Malaysian Institute of Economic Research (MIER) Consumer Sentiments Index (CSI), where components that contributed to the latest CSI (1Q22), performed better than 4Q21, with expected employment leading the improvement, followed by current income and financial outlook.

Government Measures Assisted Individuals in Maintaining their Credit Scores

Experian i-SCOREs have made modest gains over the 4-year period from the pre-COVID year of 2019 across all age groups, signifying that consumers have taken measures to manage their credit portfolio through the COVID-19 economic downturn. The average Experian i-SCORE across the 5 age groups improved from 602 in 2019 to 619 in 2022.

These gains may also have been facilitated through government measures such as the loan moratoriums, the RM10,000 special withdrawal from the Employees’ Provident Fund (EPF), Bantuan Keluarga Malaysia (BKM) payments and Financial Management and Resilience Programme (URUS) repayment assistance obtained by more than 2.7 million individual borrowers throughout the second half of last year.

Malaysia’s fiscal support measures for consumers will taper off in 2022. Consumers are also facing significant cost of living headwinds with inflationary pressures, rising cost of essential goods as well as higher cost of borrowing. With this, some Malaysians may be at risk of relying on personal loans and credit cards to fuel daily necessities.

This calls for awareness for Malaysians to equip themselves with the knowledge to identify exactly what is at risk with respect to their current credit and financial position in order to better manage their credit scores in the future. In light of this, Experian will be running the ‘Uplift Your Score’ campaign in conjunction with Experian’s Credit Health Month (CHM) from 1st to 30th June 2022. This campaign serves to increase awareness and highlight the importance of maintaining good credit health in managing personal finance.

Dawn Lai, Chief Executive Officer of Experian Information Services (Malaysia) said, “Experian believes that the lending ecosystem in Malaysia is fast evolving and consumer literacy on financial knowledge is a fundamental life skill that one must have. As we work with traditional banks and neo-lenders, our ability to make sense of these new credit facilities has been added to our Credit Health Month knowledge base so that Malaysians can get the right tools, knowledge and insights to best manage their credit portfolios to face the financial challenges ahead of us.”

Helping Younger Malaysians Better Manage Credit Risk

In the area of i-SCORE Risk Grades across age groups, there is an upward migration of weaker grades to the fair and good standings. These are evidenced from the perspective of comparisons from the present year (2022) to the immediate past year (2021) and also from 2019, the year before the pandemic.

Credit Risk Grades continue to be stronger for age groups 36 – 50, with 6 per cent and 29 per cent of those 51 and older lodging “Strong” risk grades. Strong risk grades implies a less than 1 per cent default rate. Overall, it demonstrates that as Malaysian consumers mature, they can manage their credit risk better over time.

Credit Card & Non-secured Credit Debt Still a Cause for Concern

In the area of arrears on unsecured credit lines (credit cards and personal loans), an average of 9.1 per cent of Malaysians are 90 days past due on their repayments on credit lines in 2022. This means that 9 out of 100 Malaysians have taken 90 days or longer to repay their unsecured credit facilities in 2022.

Of particular concern are consumers aged 22-28 years of age. Non-secured credit repayments which have fallen to 90 days past due are high within this segment at 26.4 per cent in 2022. This implies that 26 out of 100 consumers within this age group are finding it challenging to repay 90 days after their payment is due.  

“As part of our commitment to financial inclusion, the Credit Health Month activities are targeted at educating the younger audiences on how to manage credit through life. This is especially so with more new consumer credit options available online like Buy Now, Pay Later (BNPL) and others. We are partnering with Federation of Malaysian Consumers Associations (FOMCA) to bolster outreach to the masses in guiding them on financial knowledge to make informed credit and financial decisions,” added Lai.

Saravanan Thambirajah, CEO of FOMCA commented, “We are delighted to work with Experian on their Credit Health Month activities as we are of the same spirit and intent – that consumers should be empowered to make informed decisions for themselves. We are embarking on this educational journey together to help consumers avoid overextending themselves on credit and help them identify the right credit offerings that suit their lifestyle and income. We encourage Malaysians to take the right steps in learning the essential financial knowledge to guide positive credit decisions throughout life.”

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