This blogs helps to know more about Credit score in UAE.
A credit report plays a significant role in your financial life. It helps banks determine how credit-worthy you are. Though introduced only in 2014, credit reporting is now standard across UAE.
This implies that it is now important to keep a note of your finances such that your credit report does not suffer.
Who Runs Credit Reporting In UAE?
The concerned organization is the Al Etihad Credit Bureau (AECB). It was set up by the federal government of the UAE in 2010.
Its function is to collect regularly, payment and credit information from both non-financial and financial institutions in the UAE.
After analyzing such data, AECB can come up with an accurate report (credit score) on the credit-worthiness of any given person. It indicates whether he or she is likely to default on loans.
What Data Is Collected?
Your bank will access AECB data about your financial obligations. Hence, if you have some loans and a few credit cards, it will be indicated in your credit report. Additionally, the details of your payment history will also be included.
Thus, if you regularly miss loan repayments, or your credit cards are maxed
out, it will be shown in your credit report.
At the same time, if you have a stellar record with no late payments of loans and a credit card which is always paid up, this will also go into your credit report.
AECB will also collect data from non-financial firms to know if you are current on other financial obligations.
Thus, for instance, if your telecom providing company reports on any missed bill payments,
or so does any other company, it will be recorded in your credit report.
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What Is Credit Scoring?
Credit scoring was launched last year by the AECB. It is a more advanced version of credit reporting.
For a credit score, the AECB will analyse all the data it collects about you and compiles it into a score.
The score ranges from 300 to 900. A low score indicates that you will be risky to be lent to while a high score indicates that you are dependable and not risky.
How is the Credit Score Calculated?
The process is much like a credit report. But while the credit report simply lists your liabilities and highlights any missed payments, the score provides a general indicator as to how risky a debtor you might be.
Issues like missed telecom bill payments, maxed out credit cards and bouncing cheques will all have a negative impact on your credit score.
The vital point to note is that your credit score is fluid and flexible. It changes much on the basis of your financial behavior.
This implies that if you have a poor credit score, you can adopt steps to improve it.
Why Do You Need Good Credit Scores?
Like the case of credit reports, banks will pull your credit scores when you are applying for a Credit card or Personal loan.
As a rule of thumb, most banks will refuse you a loan in case your credits score is less than 500 or 400. In sum, if you are planning to buy a vehicle or a home, you need a good credit score.
How to Improve the Credit Score?
You can take many steps towards improving your credit score. Firstly, get hold of your credit report and identify issues which are pulling down your credit score. After you do this, you must keep on top of your payments and ensure that all your financial obligations are met.
Improving your credit score is totally possible through careful planning.