Youths between 22 and 28 have poorer credit management amid Covid-19, study reveals

KUALA LUMPUR, March 3 — The Experian Information Services today said that its Experian i-SCORE Analysis revealed that 39 per cent of 22 to 28-year olds’ credit scores weakened in Covid-19 impacted year. 

Its chief executive officer Dawn Lai said that the firm has observed improvements on credit risk grades of older age groups in 2020, compared to in 2018.

“Almost 70 per cent of individuals aged 29 to 35 either maintained or improved their risk grades over the last three years. 

“This similar improvement was seen across consumers in older age groups, with 87 per cent of individuals aged more than 65 years maintaining or improving on their risk grades.

“This suggests that despite Covid-19, individual debt repayment of Malaysians was broadly steady in 2020, with weakness shown more in younger consumers, aged 22 to 28 years,” Lai said in statement. 

Experian i-SCORE is a consumer credit score in Malaysia. It is based on the statistical analysis of a consumer’s credit files to derive a numerical score ranging from 300 to 800 to represent the credit worthiness of the individual at a point in time.

In the Experian i-SCORE Analysis, a total of 5.7 million individuals across age groups were studied, with a geographical spread of consumers across Malaysia. 

Credit facilities included in the study comprised credit cards, personal loans, hire purchase, mortgages, overdrafts, government and education loans, plus others.

Lai said the largest shift in the credit mix from 2018 to 2020 was seen among younger Malaysians. 

She added the most significant proportion of their credit facilities mix three years ago was in government and education loan and others. 

“In 2020, this changed to credit cards, which almost doubled from 20 per cent to 38 per cent. Nearly two in five (39 per cent) individuals within this age group also saw their risk grades deteriorate,” she said.

She explained that new-to-credit consumers are particularly vulnerable as they may not have sufficient experience in credit management. 

“Any mismanagement of credit may impact the consumer’s credit score and lead to longer-term effects on access to credit facilities. 

“Experian’s advice to younger Malaysian consumers is to take proactive measures to improve financial literacy early. 

“Critically, monitoring your own credit score will provide consumers with a better appreciation of credit management through life,” Lai added. 

Lai also pointed out that recent RinggitPlus Malaysian Financial Literacy Survey 2020 revealed that individuals aged below 35 years are financially illiterate.

“Only 29 per cent realising the importance of emergency funds since the movement control order (MCO) started, with almost one in four (23 per cent) spending exactly or more than what they earn. 

“Three in five (almost 60 per cent) in this age segment said that they were unable to sustain themselves solely on their savings beyond three months,” she said.

Despite a very challenging 2020, Lai said the credit risk scores have remained broadly robust. 

“This could be attributed to various government initiatives and stimulus measures introduced. In the long term, as these interventions ease, the real impact may surface and affect the economy and consequently, business sustainability and jobs. 

“As individuals, credit decisions play a very critical role in our lives. With these economic uncertainties ahead of us, we urge Malaysians to remain proactive and take a more informed view in managing their credit and finances to plan for the future and our road to recovery,” she added.