How to Build Credit Without a Credit Card in Malaysia?

Key takeaways:

• Here's how to build credit without a credit card: apply for a personal loan, a credit card with zero annual feel, a hire purchase loan or become an authorized user.

• However, having at least one credit card is vital for credit scoring and demonstrating creditworthiness to financial institutions. 

While credit cards are often used to build credit, they are not the only option, In Malaysia, there are several strategies on how to build credit without a credit card.

This article will guide you through how to build credit without a credit card, helping you create a strong financial foundation and open doors to future opportunities. 

How to Build Credit Without a Credit Card

Building credit without relying on a credit card is not only possible but also practical. Here are several strategies on how to build credit without a credit card in Malaysia:

1. Apply for a Credit Card with Zero Annual Fee

One effective way to build credit is by applying for a credit card with zero annual fees.

Choosing a card without an annual fee helps you keep your expenses low, allowing you to use the card primarily for fuel purchases and emergencies.

This strategy ensures that you can manage your spending while avoiding unnecessary costs. What’s more, you can positively influence your credit score by:

• Ensuring full and on-time payments each month.

• Spending within your means to avoid accruing debt and interest.

Responsible early credit management can build the financial discipline needed for future larger loans, such as cars, homes, and businesses.

2. Pay Student Loans Diligently

If you have student loan debt, make timely payments every month. Student loans are reported to credit bureaus, so consistent payments can positively impact your credit history.

3. Apply for a Personal Loan

Personal loans are an effective way to build credit if you prefer not to open a new credit card.

By taking out a personal loan, you can showcase your ability to manage and repay debt, which can positively influence your credit score.

It’s important to ensure timely payments and aim to repay the loan fully as soon as possible.

Plus, consistent, on-time payments help build a strong credit foundation and reflect positively on your credit history.

However, be cautious of higher Annual Percentage Rates (APRs), especially if you have limited credit history or past defaults.

They can make loans more expensive and difficult to repay, potentially leading to financial strain.

Additionally, confirm your financial stability before taking out a personal loan. Failing to meet payment terms can negatively affect your credit score, making it hard to achieve loan approvals in the future.

4. Take Out a Hire Purchase Loan

Buying a vehicle is a common, first significant purchase during the early stages of a career. Despite depreciation, owning a car offers practical use and advantages.

Acquiring a car through a hire purchase loan can help establish a credit score with consistent monthly payments. However, most car loans require an initial down payment.

Why Having a Credit Card is Crucial for Loan Approval in Malaysia

In Malaysia, possessing at least one credit card is vital for credit scoring because it represents an unsecured loan that requires no collateral.

This makes it a key factor in demonstrating your creditworthiness to financial institutions.

Banks are particularly cautious when approving personal loans and closely examine whether an applicant has a credit card, as it reflects the individual’s ability to manage credit responsibly.

Without a credit card, the maximum personal loan amount is typically capped at RM30,000, regardless of the applicant’s debt service ratio (DSR) or income.

This limitation can pose a significant barrier for those seeking larger loan amounts for personal use.

In contrast, home loans are evaluated differently. A clean credit report (CCRIS) and a satisfactory DSR can qualify an individual for up to RM800,000.

The reason for this is because home loans are secured with the property as collateral. If the borrower defaults, the bank can claim the property to recover some of the funds.

In summary, while credit cards are not the only way to build credit, having one is crucial for loan approval in Malaysia.

It demonstrates financial responsibility and significantly influences the amount and type of loans you can secure.

Why Was Your Bank Loan Application Rejected in Malaysia?

Applying for a bank loan in Malaysia can be challenging, and several factors might lead to rejection:

1. Credit Issues

CTOS score below 550: Banks consider this a high-risk indicator.

Late payments: More than two months overdue within the last six months.

Special Attention Account (SAA): Flagged accounts.

Trade references: Exceeding RM1,000.

Legal issues: Including bankruptcy.

2. Income Factors

Recent employment: Less than six months at your current job.

Income in cash: Unverifiable income.

No EPF contributions: Employment without EPF contributions.

Contract or freelance work: Considered unstable income.

3. High Debt-to-Service Ratio (DSR)

DSR over 70%: Monthly instalments exceeding 70% of net income make approval unlikely.

In situations like these, bankers cannot assist clients in securing a loan. Applying to these circumstances would not only waste time but could also worsen your financial record.

If rejected, you must wait six months before reapplying to the same bank, and each application can lower your CTOS score by 30 to 50 points.

Moreover, a CTOS score below 550 leads to immediate rejection by some banks.

Citywide Advisory’ Loan and Consultancy Services

Citywide Advisory is a trusted bank loan and debt consolidation agency in Malaysia, offering an array of financial solutions, including:

• Personal loan services

• SME loan services

• Mortgage loan services (to purchase a new home, refinancing and cashback purposes)

• Collateral loan services

We also provide tailored loan advice customised to your individual circumstances, considering a variety of factors like:

• Required loan amount.

• Urgency of the need.

• Property ownership duration.

• Income level.

• CTOS score, including credit score and history.

Personalised Loan Consultancy Services in Malaysia

Citywide Advisory is the BEST loan advisory service in Malaysia.

Citywide Advisory also offers personalized loan consultancy services, helping clients understand and improve their rejected loan applications for refinancing housing loans and more.

We customise our loan recommendations based on an individual’s needs, considering factors like:

• The specific loan amount you require.

• The urgency with which the loan amount is needed.

• Whether you or your parents own a property that has been held for over ten years.

• Your income level.

• Your CTOS score (such as your credit score and credit history).

Our goal is simple: to help you find the right loan solution, paving the way to financial stability and debt freedom.

Social Media Channels:

Facebook: https://www.facebook.com/Citywide.Advisory 
Instagram: https://www.instagram.com/citywideadvisory/ 
Youtube: https://www.youtube.com/@CitywideAdvisory