Good Credit Score Means Good Financial Health – Understanding How Credit Score Works can Help You Save Thousands of Dirhams
Credit reports and ratings are critical to any economy’s financial soundness. Its major purpose is to assist financial institutions in assessing an individual’s credit standing using the information contained in the report prior to issuing credit products to that client (credit cards, personal loans and so on).
The Al Etihad Credit Bureau is a company that provides credit reports to UAE residents and financial institutions.
As an individual, having a good credit score will not only increase your chances of getting a credit card or loan (personal loan, auto loan, home loan) but, almost more importantly, will help you save money because banks frequently give individuals with better credit scores better terms (lower interest rates, higher loan amounts, etc.).
We’ll explain credit reports in more detail in this article.
Components of a Credit Report
Financial Liabilities – Financial institutions must report to the UAE Credit Bureau information on credit facilities such as credit cards, personal loans, and mortgage loans. Some of the major data elements given include assigned credit limits, used credit card limits, payments paid, delayed payments, returned/bounced checks, loan amounts issued, outstanding balances, loan/credit card age, active status, police case history, and so on. In addition, the credit bureau receives the following information:
Employment Details: Employer Name, Income, Date of Employment are a few details pertaining to employment
Addresses: Residence address, emirate, contact details including mobile numbers and email ids.
Personal Identification – Emirates Id number, Passport Number, Date of Birth etc.,
The Al Etihad Credit Bureau (AECB) is in charge of compiling data from all financial institutions (as well as some non-financial businesses like telecom and utilities suppliers) and summarizing it at the individual customer level.
These facts are organized in a systematic and clearly understandable style that financial organizations can use to assess potential customers’ creditworthiness.
What is a credit score and why is it important?
The credit bureau assigns a three-digit credit score depending on numerous factors such as the number of loans, repayments, late payments, credit utilization, and so on. Credit scores range from 300 to 900, with higher scores indicating greater financial health.
The credit score is a measure of a customer’s financial profile, and it’s worth noting that many banks are already offering credit score-based features to their customers (interest rates, loan amounts, and so on). This means that the higher your credit score, the better the terms you’ll get.
So, what is the mantra to maintain a healthy credit score?
Below are some simple disciplined practices one needs to follow:
Do not hold too many credit cards. Find the best credit cards for “You” and use them consistently. Close the ones that aren’t right for you or that you have but don’t use very often.
Ensure payments are made on time. And wherever feasible, in its entirety. This is the most essential factor, and it accounts for a considerable portion of one’s overall score. Missing payments is a big no-no, and it will have a negative influence on your credit score. Always keep in mind the golden rule: “only borrow what you can afford to repay”!
Avoid going over the credit limit on your credit card.
Try and stay below 40% of your credit utilization. If you have a credit limit of AED 10,000 and your current credit card balance outstanding is AED 4,000, your utilization rate is 40%. The lower the better.
Keep copies of your bank clearance letters for records, there are possibilities that one might have to provide them to have the details amended (if they still show up on the credit report).
Please keep in mind that credit scores are not set in stone; they are a dynamic and ever-changing variable that is updated on a regular basis as new information from banks and financial institutions becomes available.
Credit scores require a significant amount of time and effort to improve, and in this situation, prevention is certainly preferable to treatment.
How and where can I get my credit report?
For individuals the best recommended option is to download the AECB (Al Etihad credit bureau) app on the mobile phone via Google play or the IOS App store and download the report or score. Note, the charges are much lower to download the report online rather than by visiting an AECB branch. Click here to find more details.
Takeaway
Before making a financial decision, such as signing up for a credit card in UAE, www.bankbychoice.com strongly advises you to evaluate goods using an impartial and unbiased comparison site.
Most UAE citizens will need to look into possibilities for obtaining credit from a financial institution at some point. It could be as basic as not being able to pay a yearly school fee or covering an unforeseen medical bill. A good credit score can not only make the process of obtaining a loan much easier, but it can also save thousands of dirhams.
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