KUALA LUMPUR, Nov 25 — Credit-scoring firms are competing to bring their risk-gauging models to Malaysia in a push that could create industry standards to measure the risks that local banks take when they lend, the Wall Street Journal (WSJ) reported.
The paper said that a California-based credit company, Fair Isaac Corp (FICO) is planning to announce its partnership with local credit-reporting agency, CTOS Data Systems Sdn Bhd to roll out its credit scoring formula to financial bodies early next year.
It reported that notable credit-reporting companies TransUnion and Experian are also partnering Malaysian firms to develop credit scores, hoped to become a standard to gauge risk in the industry.
Some Malaysian banks use internally developed credit scores to gauge the risk but a more uniform industry score could provide a more accurate gauge of risk, allowing financially responsible borrowers to get lower rates on loans, the paper reported Dawn Lai, general manager for Ram Credit Information in Malaysia as saying.
Those with spottier payment records may be offered smaller loans or have to pay higher interest on the loans they take, Lai was further reported as saying.
Ram Credit Information is in partnership with Experian, a British credit-scoring firm.
The paper said the new development is potentially significant for Malaysia’s economy, as the credit-scoring models enables lenders to more accurately assess the risk of borrowers paying their bills and could make them more comfortable about extending credit to Malaysian borrowers.
It also pointed out that the credit score introduction comes at a time when increased debt loads saw Bank Negara executing several counter measures, such as raising the minimum annual income required to qualify for a credit card.
Household lending in Malaysia is among the highest in Asia. Data from Bank Negara shows that household debt reached 86.8 per cent of gross domestic product (GDP) at the end of 2013 from 80.5 per cent in 2012.
CORRECTION: This post has been updated to correct the name of local credit-reporting agency, CTOS Data Systems Sdn Bhd.
