What does a 524 credit score mean?

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Knowing your credit score in the UAE is essential, as it plays a vital role in determining your eligibility for loans, credit cards, and other financial services. A credit score is a three-digit number that summarises your creditworthiness, which is based on your credit history, payment behaviour, and outstanding debts. A higher credit score indicates a lower credit risk, making it easier for you to obtain credit at favourable terms.

If your credit score is 524, it is considered a poor score and could negatively impact your ability to access credit. This score may indicate that you have missed payments, defaulted on loans, or have high levels of debt. It is, thus, crucial to understand what a 524 credit score means and how it can affect your financial future.

In this article, we will explore the meaning of a 524 credit score, the factors that affect it, and how you can improve it. By the end of this article, you will have a better understanding of your credit score and how you can work towards improving it.

What is a Credit Score?

The term ‘credit score’ refers to a 3-digit number between 300 and 900 that represents a person's creditworthiness. The higher a borrower's score, the better they appear to prospective lenders.

A person's credit history, which includes the number of active bank accounts, the total amount of debt, the history of repayment, and other factors, is used to determine their credit score. Lenders use credit ratings to assess the chances of a borrower making loan repayments on schedule.

Your credit score can have a significant impact on your financial life. It is crucial in deciding if a lender will provide you with credit. Moreover, your credit score may affect the amount of the initial deposit required to purchase a smartphone, cable subscription, utilities, or to rent an apartment.

Who Calculates Credit Scores in the UAE?

The al etihad credit bureau (AECB) produces credit scores and reports in the United Arab Emirates. By accessing the AECB website or mobile application, anyone in the UAE can view their credit score. Note that AECB charges AED 10.5 for establishing the credit score of an individual using internet platforms.

You can also perform a free AECB credit score range check when you apply for a bank loan or credit card through Policybazaar.ae. On the other hand, for a cost of AED 84, you can generate your credit report and score using AECB's online platforms. In contrast to other nations where numerous bodies are involved, AECB is the sole organisation in the UAE that produces credit scores for residents and citizens.

What Does a 524 Credit Score Mean?

A 524 credit score is considered to be below average in terms of credit standing. It suggests a deficiency of credit history or previous credit problems. When applying for unsecured credit, which does not need collateral or a security deposit, such as a personal loan, mortgage, or credit card, credit scores of this level can make it difficult to get approved.

Tabled categorisation of credit scores in the UAE -

Range of Credit Score  Category Star Equivalent
300-540 Very low 1
541-650 Low 2
651-710 Medium 3
711-745 High 4
746-900 Very High 5

Depending on your other qualifications, such as your employment and income, you can be qualified for a specific sort of loan. But even if you are approved, you will probably have to pay more in fees and interest rates than individuals with higher credit scores because lenders generally perceive applicants with a 524 credit score as high-risk.

Credit Cards for 524 Credit Score

With a 524 credit score, your chances of obtaining a conventional credit card are slim. Credit cards are unsecured sorts of debt, due to which banks are frequently a little more cautious compared to loans guaranteed by physical resources, such as mortgage and car loans.

There are still a few options, though. On another person's credit card, for instance, an individual with this credit score can be added as a co-applicant.

Another option is to apply for a secured credit card. Secured credit cards perform all operations, including regular credit reporting, exactly like conventional credit cards. The contrast is that typically, a deposit equivalent to your credit limit is required to "secure" the account.

Because secured cards pose less of a risk to credit card issuers, those with poor credit may find it easier to obtain them. A secured card might be helpful for you as a borrower if the lender informs AECB about your timely payments and other credit activities.

Personal Loans for 524 Credit Score

It can be tough for you to be approved for a personal loan if your credit score is 524. Given your current credit score, you may not be able to shop around for the best personal loans at the lowest interest rates. Instead, you may be forced to settle for a personal loan with a high-interest rate and other fees like an origination fee. As a result, you might find a personal loan very unappealing, particularly if you want to use it to settle high-interest credit card debt.

In such cases, you should rather think about whether you genuinely need a personal loan now if you want to utilise it to finance a sizable buy. If you can hold off until after you have finished building credit, you may qualify for a personal loan in the future with a lower APR and better terms. If you're in dire need of money and are having problems finding a personal loan that you can qualify for, think about getting a payday loan.

524 Credit Score Home Loans

Similar to personal loans, it could be difficult to get a home loan with a 524 credit score. Finding a home loan with a 524 credit score may be even more difficult because a mortgage loan is one of the longest commitments that a person may take on. Typical mortgage maturities range from 20 to 25 years. Every bank completes all necessary measures prior to processing a loan application for a home.

With a low credit score, you can take mortgage insurance before getting a home loan. Mortgage insurance, a requirement in the UAE when you take out a home loan, financially protects your property and may even help you get a loan (albeit with a larger down payment because of your low credit score). In case of an unforeseen situation, this insurance plan can help in settling the loan.

Auto Loans for 524 Credit Score

Receiving approval for a car loan with a credit score of 524 won't be easy. If approved, the loan would probably have a hefty interest rate that may nearly triple the cost of the car throughout its lifetime.

If you give yourself enough time to raise your credit score before submitting an application for a car loan, you could eventually be able to get better rates. If you don't have the time to wait, there are a number of ways to get a car loan even with bad credit:

  • Consider having a co-signer if you have a trustworthy cousin or friend with good credit who is willing to share the cost of a car loan with you.
  • Look for more lenders, such as a credit union or an online loan company.
  • Ask the dealership if they have a financing department that specialises in working with those who have poor credit.
  • Only as a last resort can "buy here, pay here" financing be used.

524 Credit Score and Insurance Plan

Because the term ‘credit score’ seems to be immediately related to banking issues, many people fail to recognise the linkages that it may have to other distant but closely-related businesses. One such sector is insurance. Despite the fact that insurance policies are not financial or banking goods, they are still influenced by the applicant's credit score.

The concept of insurance is based on client risk profiles. Your level of risk is directly correlated with the increase in your insurance premium. This is because your credibility as an applicant plays a significant role in developing the risk profile. If your credit score is 524 or less, you may be labelled as an unreliable creditor.

If you are an unreliable creditor, the insurance company cannot count on you to make your insurance payments on time. As a result, insurance rates may get increased to reflect the risk that an unreliable creditor represents. In conclusion, you may have to pay excessive insurance premiums for all kinds of insurance policies if your credit score is 524 or lower.

You may easily find affordable insurance premium rates if you have at least a fair credit rating. Of course, a number of other elements also have an impact on the overall price you end up paying for insurance protection. But in this case, credit ratings are just as important.

How to Get Loans for a 524 credit score?

The AECB credit score assesses your credit portfolio based on factors such as your credit history, credit limit, repayment history, and other factors. As a result, the bank analyses your credit score to determine your risk tolerance and repayment capacity. Although many individuals believe it is challenging to obtain a loan with a 524 credit score, there are certain actions you may take to alter that:

  • Provide Adequate Income Sources to Prove Your Financial Stability - If you have obtained a salary rise or have another source of income, the lending institution may still consider your loan application even with a 524 credit score. Even if you have a low credit score, the bank could grant you a loan if you demonstrate that you have steady employment and a reliable income.
  • Apply for a Lower Loan Amount - A low AECB score often means increased risk for the lender when applying for a significant loan. The bank will incur a huge loss if you don't make your payments, the lender claims. A smaller loan request with a 524 credit score, however, lowers the risk to the bank and increases their likelihood of accepting it.
  • Apply with a Co-applicant - Loans with poor credit scores are easier to get when a co-applicant or guarantor has a solid AECB rating. Their income and reputation will increase your eligibility, giving the bank or lending institution more reason to approve your application. But keep in mind that finding a co-applicant or guarantor needs work as they'll be in charge of paying back the loan in the event of a default.
  • Opt for a Secured Loan - You might want to try obtaining a loan with a 524 credit score by putting up some sort of security after you've tried the two aforementioned methods. One of the most popular categories of secured loans is the loan against property. In essence, a loan against property is a big loan that you are eligible to apply for as long as you can give proof of any property you own that will serve as security or collateral. The documents remain the property of the Lender until the entire amount of your Loan is repaid. If you are unable to pay the debt, the bank has the right to auction off your property to recuperate its losses.
  • Check Your Credit Report for Errors - AECB credit records may contain errors relating to identification, finances, credit history, repayment, and other factors. Such mistakes could negatively impact your credit score without your fault. Due to this, it is imperative to constantly check your credit report for errors and report them so that they can be repaired.

Building Credit – What Can You Do to Improve Your 524 Credit Score?

To improve your 524 credit score, you take the following measures -

  • Aim to Achieve 30% Credit Utilisation or Lower - Your credit consumption is the portion of your available credit that you are currently using. The simplest approach to keep your credit utilisation under control is to pay off your credit card amounts in full each month. If you can't always do this, a good general rule of thumb is to keep your total outstanding debt at 30% of your total credit limit or less.
  • Pay Your Bills on Time - If you pay off your credit card bills late or in part, your credit score will drop. You can start by making sure that all of your payments are made on time in order to improve your credit score. It should be emphasised, however, that you must adhere to this procedure for all other recurring monthly payments such as those for personal loans, car loans, home loan instalments, and more in addition to credit card bills.
  • Clear Off Existing Debts - To improve your credit score, one of the simplest methods is to pay off all existing bills and make all necessary payments on time or early. You have numerous options for paying off your present debts and raising your credit score, including balance transfers, personal loans, cash advances, and more.
  • Pay Off Your Revolving Account Balances - Whether or not you are in arrears on your payments, a sizable debt on revolving credit cards may lead to a high credit usage rate and decrease your ratings. If you keep the balance on revolving accounts like credit cards and credit lines below the credit limits, you can improve your credit ratings.
  • Consider Debt Consolidation - If you have multiple unpaid debts, it can be a good option for you to get a loan for debt consolidation from a credit union or banking organisation and use it to settle them all. Because you will only have one responsibility to worry about if you can get a loan with a lower interest rate, you will be able to pay off your debt more quickly. This may improve your credit score and decrease the amount of credit you use.
  • Limit Your Credit Applications - Your credit score may be negatively impacted by hard inquiries for up to 2 years. Hard inquiries are done when you request new credit cards, loans for a house or automobile, or other types of new credit. 

It's unlikely that a few hard inquiries here and there will have much of an impact. However, if you have a lot of them in a short period of time, it will hurt your credit score. Banks could view your request for money as an indication that you are experiencing financial difficulties and view you as a higher risk as a result. If you want to raise your credit score, hold off on applying for new credit or loans for a while.

In a Nutshell

A 524 credit score is considered a below-average or ‘very low’ score in the UAE. It implies either a lack of credit history or major past credit issues. Credit scores of this level can make it challenging to obtain approval for unsecured credit, which does not require collateral or a security deposit, such as a personal loan, mortgage, or credit card.

With a 524 credit score, your chances of obtaining a standard credit card are slim - this extends to loans as well. Sadly, you might have little choice but to accept a loan with a high-interest rate and additional costs, including an origination charge.

Similarly, insurance plans are nonetheless impacted by your credit score even though they are not financial or banking products. This is due to the fact that client risk profiles are the foundation of the insurance concept. Your level of risk and the rise in your insurance premium are directly tied. The risk profile, after all, is significantly influenced by your credibility.

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