A credit score is a three-digit number that is based on a person’s financial behavior, including their debt repayment plan. The number of open loans, whether they pay their bills on time or late, and many other factors. The credit score, though it might seem like a straightforward number, is very important when applying for any form of loan in the UAE. A good credit score can help you secure a loan or credit card. But it can also get you lower interest rates and a bigger credit limit.
Increasing your credit score requires consistent work in managing your finances, making both your monthly payments and your debt payments on schedule, among other things. But it’s also not that tough, as long as you follow a few simple instructions. You can keep your score above average and prevent any difficulties in getting access to important financial services. We’ll provide you some useful advice in this article that you may use to raise your credit score rapidly.
Why is a Credit Score Important?
Before granting you a loan or a credit card, banks and other financial institutions in the UAE will first verify your credit score. Your credit score assists them in determining your financial stability and financial management skills.
A good credit score can help you get a loan or credit card with preferential rates and benefits quickly and easily. Keep in mind, that credit score is not the only factor that banks take into account. Other factors that influence your risk profile include your age, location, monthly income, number of active loans, and so on.
How to Improve your Credit Score?
Making Payments on Time
When your credit card bill is due each month, make sure to pay all of your bills on time to avoid adding interest to your credit account. If you do not make payments on time month after month, your credit score will suffer greatly. You must settle all of your debts, pay your utilities on time, and send your bank and credit card companies all of your payments during each month’s grace period. Interest is applied to the unpaid balance if your payment is carried over to the next month. In the UAE, this interest is typically very high when using a credit card. Therefore, make your payments on time and never miss a deadline to avoid paying more than what you actually spent.
Check your Credit Report
All the necessary details concerning your credit card are in your credit report. Regularly checking your credit report can help you catch any project charges for penalty setting that may have been charged to your card without your knowledge. Your credit report is a very significant piece of information. It includes the histories of every loan you’ve ever taken out, every card you have open right now, and every other line of credit you have for yourself.
A credit score may or may not be included in the credit report. Before granting you a new loan, your employer, your mortgage lender, and the bank employees all carefully review your credit record. Before granting you any new lines of credit, they will review this credit report. Thus, it is very important to keep your credit report in good shape and make sure that any reductions in your credit reports integrity is not taking place without your knowledge.
Multiple Loan Applications
Rejection of a loan or credit card application can also have an impact on your credit score. As a result, experts advise against applying for multiple loans and credit cards at the same time. If your credit card application is denied, you can try to see if you provided the proper documentation, have a good debt burden ratio, and a good credit score. Because having an application rejected lowers your credit score, make sure you check all of the listed factors before applying for a credit card.
Do Not Exceed your Credit Limit
Banks and credit card companies provide you with a credit limit for a reason. It is detrimental to your credit history if you consistently spend above your credit limit. If you are not satisfied with the credit limit offered by the bank, call them and request an increase in your credit limit. In any case, exceeding your credit limit every billing cycle is a bad idea. To maintain your credit score, limit your monthly spending to between 35 and 40% of your credit limit. This range is ideal for regular credit card users who want to continue building their credit while using the card.
Do Not Close Old Credit Cards
It is not a good idea to close your credit cards if you have several of them but are not currently activeof them. Your credit history is listed in a column in your credit report. You have been using lines of credit from various providers across the nation for this amount of time. Closing your credit card effectively makes you a less eligible borrower. The longer your credit history, the more likely you are to obtain a loan.
Clearing Existing Dues
One of the greatest strategies to raise your credit score is, to pay off your current debts and make all of your payments on time or before the due date. Balance transfers, personal loans, cash advances, etc., are just a few of the alternatives you have for paying off existing debts you already have while also improving your credit score.
Making Some Additional Deposits
You can raise your credit score by adding more deposits to your bank or credit card accounts. To make some extra payments to your credit card, just make a payment that is greater than the balance due at the end of your billing cycle.
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