What Does a 540 Credit Score Mean?

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Your credit score helps lenders evaluate whether you are a creditworthy individual. It is one of the major factors in determining if a person is credible enough for certain loans or credit cards. Credit scores in the UAE are calculated by AECB and range from 300-900. It gathers all the relevant information about your payment and credit history from different sources like banks and government agencies to calculate the scores.

If you have a good credit score, then the chances of getting your credit card or loan application approved increase significantly. Hence, it is necessary to maintain at least a decent credit score. This detailed article will help you figure out if 540 is a good credit score. It will also help you understand whether you are eligible to apply for certain credit cards and loan products with the said credit score.

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Is 540 a good Credit Score?

A 540 credit score is considered a low-category credit score and awarded a 2-star rating. Individuals with a 540 credit score may face trouble in getting their loan and credit card applications approved. The probability of getting your credit facility applications accepted with a 540 credit score depends on the risk appetite of the lender. If the lender can afford to take on low creditworthy customers, you may be able to get most credit facilities available with them. If you do get approval from the bank, you will be charged a comparatively higher interest rate for your credit facility.

What Can a 540 Credit Score Get You? 

Let’s discuss the different credit facilities and products you can score in the emirates with a 540 credit score:

Credit cards for 540 credit score

Individuals with a credit score of 540 can opt for both secured and unsecured credit cards. As mentioned earlier, the approval rate depends on the risk appetite of the bank. Secured credit cards are easier to get with a 540 credit score. When you purchase the secured credit card, your financial institution asks you to deposit a collateral sum up to the credit limit of the card. The bank has an option to use this collateral to cover the due credit card bill if you fail to make timely payments. In case you get approved for unsecured cards, getting high interest rates is very likely.

Personal Loan for 540 credit score

Personal loans are much easier to get with a 540 credit score as compared to other credit products. Most lenders generally accept loan requests from candidates with low category scores. However, you may be required to pay a higher rate of interest. The approval of your personal loan application may get influenced by a few other factors like the amount you require, tenure of the loan, your monthly income, etc.

Homes Loans for 540 credit score

When it comes to mortgage loans, financial institutions reject loan applications from candidates with a low credit score in most cases. The lenders may agree to provide you with a mortgage loan in rare circumstances. But you may have to submit collateral or accept interest rates and low loan amounts. Home loans against property may be easier to get with a 540 credit score. However, it is advisable to increase your score to have to strengthen your chances of approval.  

Auto Loans for 540 credit score 

Getting a car loan with a credit score of 540 is a moderately challenging task. Most lenders will offer high interest rates and lesser loan amounts for car loans with a 540 credit score. If you are finding it difficult to get your car loan approved, you can wait for a while and improve your credit score. 

Insurance Plans with a 540 credit score

Insurance companies look generally look into your credit score to decide the rate of insurance premium. If you have a 540 credit score, then you may get a higher premium amount. Any improvement in your credit score will also reflect in the prices of your insurance plans.

Tips to Improve Your 540 Credit Score 

It is recommended to improve your 540 credit score in order to avoid hindrances in getting loans and credit card applications approved.

Following are a few tips you can follow to improve your 540 credit score:

Timely Bill Payments:

Financial institutions check your previous 5 years' bill payment history to analyse your payment track record. Hence, it is essential that you pay off all your bills, including the credit card bills, utility bills and loan instalments before the due date.

Regular Loan Repayments:

 If you have taken a loan, ensure to make your monthly instalment payments are done on time. Prompt loan payments assure the banks of your credibility and increase your credit score.

Limiting Credit Applications:

 Try and avoid sending multiple applications for loans and credit cards in a short period. The more frequently you apply for credit facilities, the more it affects your credit score since banks pull out your score every time you send in an application.

Clearing Out Previous Bill Payments:

 Not clearing your dues can negatively impact your credit score. If there are any pending dues, you must clear them immediately and try to maintain the same pace for the future.

Analysing Your Credit Report:

 Keeping a constant check on your credit score is smart but drawing it out too frequently may prove harmful to it. It is recommended to check your credit score every three months or so to keep regular track of it. 

How to Check Credit Score for Free?

As discussed above, the al etihad credit bureau calculates credit scores for all UAE-based companies and residents, including nationals and ex-pats. Individuals can generate their credit scores on AECB official platforms for a certain fee. Alternatively, you can check your credit scores for free in UAE. All you need to do is go to Policybazaar.ae and fill the lead form from our credit card or personal loan section. After you submit your form, your credit score will be generated. 

In a Nutshell

It is recommended to make prompt payments and credit cards smartly for every individual with a 540 credit score to increase it substantially. A low credit score can result in trouble with credit cards and loan application approval. Make sure to follow the tips mentioned above to enhance your credit score. Be patient and maintain healthy credit habits to notice a significant difference in your score. You can get in touch with one of the professionals of Policybazaar.ae if you have any queries related to credit scores, finance or credit tools.

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