How to Use a Credit Card to Build Credit Score ?

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    When a service provider has to look into your financial history, it will run a credit check. This  permits access to details about your current and previous credit, payment patterns, and the different types of transactions you engage in, so as to determine how risky of a borrower you are. Your credit score defines how trustworthy you are as a borrower. 

    Now, what exactly is a credit score? It is essentially a numerical value between 300 and 900. If you have a higher score, it implies that you have greater creditworthiness. Similarly, anything below 700 on this scale is regarded as risky. You should therefore always look for ways to improve your credit score. 

    Utilizing your credit card wisely is the best way to build your credit score. Use credit cards frequently, pay off all of your balances on time, and only use a tiny amount of the available credit on your card if you wish to build a credit score.   

    Boost your credit with credit cards

    The AECB, or Al Etihad Credit Bureau, determines a person's credit score in UAE. The AECB gathers information about the borrower from numerous sources and sends a comprehensive credit report based on the data received. 

    Since credit card providers frequently report your account and credit-related activities to AECB, credit cards aid in credit building. You'll need to either obtain a credit card of your own or apply to be an authorized user on someone else's credit card in order to begin building credit using a card. Having no credit card implies zero credit history. People often think that having no credit card or not using a credit card will improve their credit score. However, a credit score is calculated by how you repay your loan. So, you must have a credit card and must use it to earn good credit points.

    Policybazaar UAE is the ideal place if you are looking for the best credit cards. We have a list of the best credit cards provided by pioneering financial institutions and banks. You can apply for your preferred credit card and earn a free credit check from us.   

    Now, let us see how credit cards help build credit scores.   

    Build credit scores through secured credit cards

    If you're just beginning to establish or repair your credit, secured credit cards are frequently referred to as the ideal stepping stone. These cards operate just like regular credit cards, but when you open your account, you'll need to submit the card provider a refundable security deposit. Even while secured cards often have high fees and aren't particularly beneficial to cardholders, prudent use can help you eventually become eligible for better credit cards.

    Above all, you can build credit scores using secured credit cards. Thus, when you apply for a credit card, you can enjoy a higher balance and other facilities. Plus, your high credit score will help you apply for loans and get them approved comparatively easily. You can browse through the latest house loans, car loans, personal loans, health insurance plans, and many more exciting coverages here on our website.

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    Build credit scores through student credit card

    If you're a student, a student credit card could be a suitable launching point. Low credit limits are typical for student cards; nevertheless, there are certain student cards that have little fees and offer incentives for purchases.

    This will also be a good financial practice from an early stage of your life. You will be familiar with the world of credit scores and know exactly how it works. The knowledge will come in handy when you apply for loans and credit cards in the future. 

    Build credit scores through an authorized credit card

    Alternatively, you could request a friend or a member of your family to add you as an authorized user on a credit card managed by them. If they add you, their credit card provider may also file a report on the account in your name with AECB. You can also have your own credit card under the chief cardholder's name (provided the person agrees). You can use the card to make purchases as well.

    As long as the primary user of the card manages it responsibly, having that person's credit card as a part of your credit history will help you build credit scores. However, if the primary cardholder fails to make payments on time or suffers from a low credit score, you have to bear the brunt as well. 

    Key reasons to improve your credit score

    The indicator used by lenders, banks, and other financial institutions to assess a borrower's ability to repay a loan on time is the credit score. Given its significance, it is safe to say that your ability to get credit with low-interest rates is directly influenced by your credit score.

    • A credit report is an overview of a person's handling of credit accounts.
    • Potential creditors and lenders consult credit records before deciding whether to extend credit to potential consumers and what terms they will accept.
    • It's crucial to frequently review credit reports to make sure the data is correct and full.

    In the UAE, 700 is regarded as a moderate credit score and if you have a score of more than 710, you are doing great in terms of managing your credit. 

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    Best practices to build credit with your credit card

    Depending on how you use a credit card, it can either help you establish good credit or damage it. Focus on making timely payments and refrain from using your credit card repeatedly within a small frame of time in order to build credit scores. The following are the most advantageous ways to utilize your credit card:

    Reduce utilization rate

    Your credit usage ratio is a crucial credit-scoring indicator that you should be aware of. This takes into account how much of your total credit line you really use each month. Concentrate on reducing your liabilities to lower your usage rate.

    Make timely payments

    Your payment history makes up the majority of your credit score. Make at least the minimum payment on time each month in order to establish credit with your credit card. The card issuer may impose penalties and you risk losing promotional interest rates on your credit account if you pay your bill after the due date.

    Setting up auto-debit on your account is one of the easiest ways to guarantee you never miss a payment. You can use autopay to make the required minimum payment and then pay the amount due, or as much as you can manage separately.

    Apply for fresh credit cards

    If you want to build credit scores using your crest card, apply for one. Then use the credit card to make a transaction that you can easily pay off. This will add credibility to your credit history and also enhance the overall rating.

    We provide various credit score and credit card-related services. Browse through the latest credit cards available on our website. You can apply for any of these credit cards that come with a bunch of exciting features. Avail of discounts and offers with the best credit cards in the UAE. 

    Moreover, we provide you with a free credit report that is otherwise chargeable. You can review your current credit score and make plans accordingly with our financial experts to boost it in a shorter period of time. 

     

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