Average Experian i-SCORE improves moderately across all age groups over last 4 years

Kuala Lumpur, 10 January 2022

It has been an unprecedented 21 months since the COVID-19 pandemic struck with full force. The resulting phases of Movement Control Orders (MCOs) forced many Malaysians to stay at home for months. The pandemic has severely impacted the Malaysian economy, reversing growth, and placing many consumers in financially vulnerable positions.

This has led to financial health taking centre stage among Malaysians as they navigate the uncertain circumstances surrounding employment and the economy.

Contrary to this prevailing sentiment, Experian’s consumer credit score – Experian i-SCORE (i-SCORE) which is a numerical indication of an individual’s credit worthiness at a point in time – has seen a slight lift, with the average credit score rising 18 points from 601 in 2019 (before pandemic) to 619 in 2021, the highest average i-SCORE over the last 4 years. This trend proposes that most consumers have managed to maintain their credit repayments over the last 2 COVID-19-impacted years. 

Note: Experian i-SCORE ranges between 300 to 800. A score above 620 is considered above average.

This performance indicates that Bank Negara Malaysia’s intervention through loan moratoriums and other support measures may have contributed positively to this trend. It also suggests that there may have been behavioural changes among Malaysians towards conservative spending during this challenging economic climate.

This is one of the key findings in Experian Malaysia’s first annual State of Credit 2021 Report on Consumers. This report spotlights how Malaysians, age 22 and older are managing personal finances over the past 4 years. 

It looks at the credit performance of consumers across Malaysia, highlighting consumer credit scores and borrowing behaviours in relation to credit. For relevant ‘before and after’ context, the report features data from 2018 and 2019 pre-pandemic years, the 2020 pandemic year, and until the third quarter of 2021. 

Experian’s State of Credit Report captures 3 central themes of the pandemic which have had major impact on consumer credit behaviour:

(1) The success of Malaysia’s fiscal support packages

The most striking example of positive influence due to the government support measures is the decline in delinquencies on credit payment. This is demonstrated across all age groups, despite a time of increased unemployment and economic uncertainty. 

In fact, the percentage of individuals with 90 Days Past Due (DPD) date for credit payment decreased by 0.7 per cent from 2.5 per cent in 2018 to 1.8 per cent in 2021. 

Malaysians aged 22-28 have the highest average DPD across all four years but showed a decrease from 6.2 per cent to 3.8 per cent. 

Such young adults may be struggling more when the pandemic struck, being in the early stages of their career with more modest income and savings than their older peers. Unemployment also struck this segment particularly hard in these past 2 years. 

Malaysians aged 35 and younger also have the lowest i-SCOREs among the 5 age groups studied. Apart from their younger counterparts who may not have the same income security, 29–35-year-olds may also be grappling with higher financial commitments as they enter the family establishment stage in their lives. As such, these 2 groups may also need to pay greater attention to managing financial products well as they navigate the next normal in the Malaysia economy. 

Meanwhile, individuals aged 65 and older held their delinquency rate steady at 1.1 per cent over the last 4 years. 

(2) The economic resilience of Malaysian households

Consumers may also be using their stimulus ringgit like those received from PEMULIH, i-Citra and other support under the National Recovery Plan (NRP) to pay down their bills and debt. Besides that, the bank loan moratorium extended till the end of 2021 has certainly helped. The fiscal discipline displayed by Malaysian households assisted in improving the average scores across all age groups in the last 2 years compared to 2018 and 2019.

“The findings from our inaugural State of Credit 2021 Consumer Report shows that Malaysians are resilient, for the most part. They make smart decisions in the face of adversity and they are agile in adjusting their financial habits when the environment or circumstances change,” said Dawn Lai, CEO, Experian Information Services Malaysia.

These behavioural trends are further reflected in the average balance in credit cards for the 5 age groups which was reduced by 4.5 per cent from RM 4,101 in 2019 to RM 3,917 in 2021. Average credit card utilisation has also decreased to its lowest levels at 22.8 per cent in 2021 across all age groups over the same period.

(3) Unique behavioural shifts brought on by the pandemic

Malaysian households took on more debt on mortgages and hire purchase loans during the COVID-19 impacted years. The government initiatives such as Home Ownership Campaign (HOC) and vehicle sales tax exemptions till end-2021 has made buying property and vehicles more attractive.  The Real Estate & Housing Developers’ Association (Rehda) stated that as at Feb 2021, the ongoing Home Ownership Campaign (HOC) has achieved total sales worth RM25.65 billion with 34,354 residential units sold. 

However, it bears to note there was a 17.0 per cent increase in the average outstanding mortgage balances from 2018 to 2021 (from RM 275,895 to RM 322,760). Likewise, there was a 13.2 per cent increase in average balance on hire purchase loans from 2018 to 2021 (from RM 37,434 to RM 42,384).

On the hire purchase front, consumers took on more credit in 2021, with a 13.2 per cent rise in average hire purchases across all age groups from RM 37,434 in 2018 to RM 42,384 in 2021. Consumers may have made more home-based hire purchasers over the COVID-19 affected years, with work from home being the norm. 

“Experian foresees that consumers with relatively unaffected incomes will continue to shift their investment towards property purchases. Meanwhile, banks and lending institutions also look set with its continuation of collateralised consumer loans, as seen in increasing property loan approval rates,” Lai added. 

Conclusion: A Happier & Fiscally Healthier New Year?

Both lenders and consumers will need to take a hard re-evaluation of their financial positions in 2022. Lenders will need to innovate new ways to provide the best refinancing to support consumers in difficult times, while borrowers need to be proactive to secure the immediate assistance which they require to overcome immediate adversities. 

“We welcome the support announced by Prime Minister Ismail Sabri Yaakob in December on the implementation of the Financial Management and Resilience Programme (URUS) for eligible borrowers who are adversely affected by the COVID-19 pandemic. The B50 segment of Malaysians who may have been disproportionately affected by job or income loss can receive the right support until they are able to be financially stable again. We urge Malaysians to step forward by the end of this month and contact AKPK or your bank to apply,” Lai commented. 

To conclude, Experian’s State of Credit Report 2021 underlines that younger Malaysians may need greater financial assistance in the form of refinancing together with financial education as they demonstrate the greatest weakness in scores and payments.

“As we look forward to the year ahead, we need to ensure that critical safeguards around financial literacy are accelerated and deepened for the generation of the future. Here at Experian, our “Know Money” financial literacy campaign continues to provide consumers with nuggets of financial advice and activities throughout the year to help Malaysians take control of their credit health and towards making better financial decisions for life,” Lai concluded.

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