What Does a 550 Credit Score Mean?

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Credit scores are used by banks and financial institutions to assess creditworthiness, i.e., the probability of payment defaults in the next 12 months. Credit scores can range from 300 to 900 in the UAE. It is an important lending criterion for most banks. Borrowers are generally required to have the minimum specified credit score to avail of credit facilities like loans and credit cards.

If the score is low, the credit facility application might get rejected or you will get a high rate of interest. This makes tracking and examining your credit score an important step in the process of obtaining loans and credit cards in the emirates. This piece covers what it means to have a 550 credit score and which credit services you can avail of. Let’s understand.  

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What Does 550 Credit Score Mean?

A 550 credit score is a 2-star credit score and belongs to the ‘low’ category which ranges from 541 to 650, as per AECB guidelines. A low credit score represents you as a candidate with low credibility. This can prove to be a hindrance in obtaining credit facilities of your choice.

If a lender happens to accept your application, they may grant the facility on unfavourable terms like – high-interest rates, low loan amount, low credit limit, limited repayment tenure, etc. A 550 credit score limits your options however you may still be able to get access to a few credit products. Let’s see what kinds of credit cards and loans can be obtained with a 550 credit score. 

What a 550 Credit Score Can Get You? 

Although a 550 credit score is a low score, it can still get you a few financial products and services which are listed below:

Credit Cards for 550 Credit Score

The following types of credit cards are generally available for candidates with a 550 credit score: 

Secured Credit Cards:

Secured credit cards are the type of card in which you have to submit a security deposit as collateral. Your credit limit is determined based on the security deposit made upfront. Applying for a secure credit card is the best option for candidates with a 550 credit score as it can also help you increase your credit score gradually. 

Unsecured Credit Card:

You can also avail of an unsecured credit card if you don’t want to pledge collateral. However, getting an unsecured credit card may be difficult with a 550 credit score. Banks in the UAE may also charge heavy rates of interest for the card as per your score. 

Special Benefit Credit Cards:

Special benefit credit cards can be either secured or unsecured credit cards. These credit cards come with special value-added benefits, one or multiple. For example, travel benefit credit cards, cashback credit cards, rewards credit cards etc. You may be able to qualify for a few special benefit credit cards depending on the individual eligibility criteria set by the banks.  

Personal Loan for 550 Credit Score

Getting your personal loan application approved with a 550 score credit is possible with most banks. However, there is a high chance of getting high interest for your personal loan with a credit score of 550. Additionally, candidates with a 550 credit score might be able to make the most out of negotiating personal loan terms. You may get better terms if you go for secured personal loans for a credit score under 550. 

Home Loans for 550 Credit Score

Most banks prefer candidates with high or very high credit scores for home loans. Home loans are the longest available loan products which make high credibility a mandatory eligibility requirement. This means that getting a home loan with a 550 credit score from top banks might not be possible in the emirates. If a lender happens to approve your application, loan terms will not be favourable.  

Auto Loans for 550 Credit Score

Most banks offer 550 credit score auto loans in the UAE. The rates of interest would be comparatively higher, and the bank might ask you to find a co-signer to further secure the loan. Additionally, for a 550 credit score auto loan, the bank may ask for a higher down payment and restrict the quantum of the loan. 

Insurance Plans with 550 Credit Score

Your credit score plays an important part in the case of insurance plans as well. While you will be eligible for the coverage, your premiums might be inflated if you have a 550 credit score. 

How to Improve Your 550 Credit Score?

It only takes a few easy tips and commitment to follow them dutifully to improve your credit from 550.

Listed below are a few things you can bring into a habit to increase your credit score:

  • Repay all your bills on time. This includes loan repayments, credit card and monthly utility payments as well. Avoid late payments and payment default completely. You can set monthly reminders or an auto-pay system to cover all payments on time.
  • Do not make too many loan applications at once or within a short period. Conduct proper research and choose a suitable credit/loan product you are eligible to get. 
  • Have a healthy mix of loans in your credit portfolio. If possible, add both revolving and instalment style credit tools to your credit portfolio and diversify it. 
  • Restrict your credit usage and utilise your credit limit smartly. Recommended monthly credit utilisation can range from 10% to 30%. 
  • Get a secured credit card and use it smartly as per recommended credit utilisation ratio to improve your credit score from 550. 

How to Check Your Credit Score for Free?

Policybazaar runs a free credit score check when you apply for credit cards or personal loans. You can simply visit our credit score section and enter your details and check your Credit Score for Free. We get your credit scores from AECB official platforms and bear the fee to maintain authenticity.  

Conclusion

A 550 credit score can be a sign of a lack of credit history or irresponsible handling of credit. You may face difficulty in qualifying for credit facilities or incur high interest rates. It is best to try and improve your score before you apply for a loan or a credit card. To do that, simply pay your monthly bills and debt instalments on time, avoid making too many loan applications, use credit cards wisely and stay consistent with these steps. Building up your score can get you multiple options for loans and credit cards on favourable terms. 

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