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UAE Credit Scores and Its Importance

By: Bankbychoice.com0 comments

Credit Bureau in UAE:

Al Etihad Credit Bureau is a Federal Government organization that collects credit data, information and financial commitments from banks and financial institutions in order to provide accurate Credit Reports to individuals, financial institutions and companies in the UAE as allowed by the laws and regulations of the UAE.

In general, a person with any form of credit facility like Credit Cards, Personal Loans, Mortgage Loans, Car Loans, etc., the individuals details including  the credit behaviors are updated in AECB.

If he/she is looking for any new credit facility, the lender will look into your credit report and decide if you are eligible for the facility and if you have any poor repayment record or defaults etc., It is more likely that the lender will reject your application if your credit score is low.

What is Credit Score?

It is a three-digit number that predicts the likelihood that you will make your loan and credit card payments on time, based on your previous credit and payment behavior.

The number ranges from 300 to 900. A low score indicates a higher risk, whereas a higher score indicates a lower risk.

What is a Credit Score Used For?

The Credit Score will help financial institutions make better-informed decisions, process credit card and loan applications faster and provide preferential benefits for those with high scores.

How is the Credit Score Calculated?

The Credit Score is calculated using information from various sources, like banks, finance companies and telecom companies.

Your Credit Score is dynamic, and changes according to your credit and payment behaviour. Missing or delaying a payment beyond the due date, frequently utilizing all your credit card limits, or taking on additional loans or credit cards may lower your Score.

However, reducing the number of credit cards, consistently reducing outstanding balances, and making payments on or before the due date will improve your Credit Score.

What is a Credit Report?

It is a document that includes your personal identity information, details of your credit cards, loans and other credit facilities, along with your payments and bounced cheque history.

The information in your Credit Report is provided by all financial institutions in the UAE on a monthly basis, as required by Federal Law.

Additional information from other sources such as telecom companies and utilities will be added over time.

What is the Credit Report used for?

It is mostly used by financial institutions to assess the credit standing of an individual or company, when reviewing an application for a loan, credit card or other credit facilities.

You can also proactively check your Credit Report before applying for a loan, credit card or other credit facility.

In a nutshell, UAE credit report and credit scores become integral part of banks and NBFCs credit decision to extend Loan or Credit Card to an individual and increasingly more weight-age given to AECB score than the internal scores of banks.  So, it is vital to pay all EMIs without any cheque bounce, ensure your credit card is utilized within the credit limit and ensure payment / min payment done within the due date.

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