How to Fix a Bad Credit Score In UAE

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    A credit score is a great way to determine whether an application for a mortgage, loan, credit card or other financial services from an institution has a possibility of being approved. The credit score, which is displayed as a three-digit figure, falls between the ranges of 300 to 900 for the UAE. 

    While the actual outcome of the approval is dependent on many variables, the AECB credit score is a significant element that is taken into consideration. Therefore, understanding how to fix your credit score quickly is essential for making it simple for you to receive the financial product or services of your choice. 

    Policybazaar UAE gives you a deep insight into the world of credit scores. If you are troubled with the query on how to fix low credit score, this is the article for you. Let's continue our discussion on the topic and familiarize ourselves with the pertinent data.

    What is a bad credit score in the UAE?

    AECB or the Al Etihad Credit Bureau assesses a person's credit score in the UAE. The AECB obtains all pertinent information regarding the borrower from various agencies and provides the necessary data to banks in the form of credit reports or credit scores.

    The definition and magnitude of a good credit score vary from region to region. In the UAE, a credit point of 700 is regarded as a healthy credit score. However, you can have a lower credit score which you can fix quite easily. We have all the expert solutions in this article to help you fix your credit score. 

    There are several factors that can affect your credit score. You must be well-educated about these factors so that your credit score does not dip down below 700 in the UAE. The AECB divides credit scores in the UAE into five fundamental categories: 

    • Very low
    • Low
    • Moderate
    • High
    • Very high

    Each category is given a star rating from 1 to 5, with 1 being the lowest star and 5 representing the highest star.

    Please refer to the following table for a clearer understanding of the credit score system in the UAE.

    Credit Score

    Remarks

    300-540

    Very low (1-star)

    541-650

    Low (2-star)

    651-710

    Moderate (3-star)

    711-745

    High (4-star)

    746 and higher

    Very high (5-star)

     

    The higher the credit score is, the fitter you are for a debt or a loan. Therefore, it is quite natural that you would like to boost your credit score to apply for suitable loan amounts. 

    How does a bad credit score affect you?

    An extremely low credit score may prove to be a barrier to several credit-related endeavors. This involves applying for loans and opening credit card accounts. Additionally, a very low credit score has an impact on items like UAE insurance rates. The credit score is still a crucial aspect in determining the rate for the majority of insurance kinds, even though it may not be the main influencing factor when it comes to insurance premiums.

    In general, having good credit can lead to cheaper premiums, whilst having bad credit can lead to higher premiums.  

    You are more likely to be approved for credit and receive better interest rates and conditions the higher your credit score. Low credit scores might make it challenging to qualify for credit at all, let alone credit that is affordable.

    Here are a few adverse effects of a low credit score. 

    Loans likely to get rejected

    A financial institution or a bank approves a loan when you have a healthy credit score. If you do not have a good credit score, they will think twice before approving a loan. Plus, you will face difficulties in getting bigger loans sanctioned. For instance, home loans or car loans are usually high and if you do not have a good credit score, banks will not approve such loans. 

    Call for greater security deposits

    If you have a low credit score, it is concluded that you tend to fall behind when it comes to repayment. Therefore, banks and money lending institutions will ask for greater security deposits as a safe way out. In case you falter to repay the loan, the financial institution will seize the security deposit. The deposit may include your home, car, and other valuable assets. 

    Challenging to get a new credit card

    A low credit score is always a deterrent factor when it comes to applying for a new credit card. The first thing the credit card provider will look into is your credit score. This is the mirror of your creditworthiness. If you don’t have a good credit score, you will not be sanctioned a credit card of sufficient balance. 

    Higher rates of insurance premiums

    When you apply for a fresh loan, the premium amount is often determined by your credit score. If you have a credit score below 700 in the UAE, you are susceptible to paying higher premiums on insurance. For instance, when determining your prospective risk of filing a claim, car insurance companies frequently obtain data from your credit report in addition to your driving record. 

    insurer your car

    How to fix a low credit score?

    Understand the fundamental components of credit score such as whether you pay your payments on time and whether you have credit card balances and pinpoint the issues that are having a negative effect. Another crucial step is to check your credit report for mistakes. 

    The following factors have the most effects on your credit score:

    • Your payment history (35%), including whether you always make on-time payments or have previously experienced missed or late payments.
    • Your credit utilization rate (30%) indicates how much of your total credit line is currently being used
    • How frequently you use credit (15%)
    • The variety of credit products you presently have and have had (10%)
    • The number of "hard inquiries," or recent credit account openings and applications, that you've made (10%)

    So, the most straightforward way to fix your credit score is to keep your payments on time. Here are some recommendations for the same:

    • To ensure that payments are made on time and without error, you can choose automated bill payments
    • By setting up due-date alerts, you may remember when to make your payment
    • You can set up either a paper filing system or a digital filing system to keep track of your monthly expenses

    Apart from timely payments, you should follow the practices outlined below.

    • By putting more deposit amount to your bank or credit card accounts, you can increase your credit score. Simply make a payment that is more than the minimum due towards the end of a billing cycle to add some spare funds to your credit card
    • Your credit score can be lowered if you apply for a loan and have it denied. Therefore, it is advised to not apply for many loans at once even if you need one immediately.
    • Since your credit score is based on how well you handle loans, you cannot have a good credit score if you do not own any credit cards. To raise your credit score, apply for a new credit card and manage it responsibly. To start, you may submit an application for small, reasonable loans. Your credit score will undoubtedly increase as a result

    Browse through the best credit cards in the country and apply for the most convenient one through Policybazaar UAE. We also offer credit score services. Unlock these exciting features today and let us collaborate with you for a long and fruitful financial journey. 

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