Reasons for Low Credit Score in UAE

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A credit score is primarily a score that varies between 300 and 900 and impacts the chances of an individual obtaining approval for their application for credit cards, loans, and other financial services and products in the UAE. Based on the credit score, the concerned bank or institution may decide whether to provide a credit card or a loan as well as the approved amount limit. 

Generally, high credit scores make users eligible for most loans and credit cards. However, individuals with a low credit score are considered incapable of making the specified repayments at regular intervals by the provider institution. Thus, complications can arise when your credit score is estimated to be low.

Several factors are there that can reduce your credit score overall. In the following sections, we will have a look at the major factors leading to a low credit score and the steps to be taken to improve the situation. 

What is AECB?

Al Etihad Credit Bureau, denoted by AECB, is a financial institution that analyses the credit score of an individual in the UAE. The bureau, authorised by the UAE Federal Government, gathers all the financial details of a person in order to evaluate their credit score. 

It should be noted that you can always Check AECB Credit score and credit report form AECB. However, it will charge you an amount to generate both documents.

What is a Low AECB Score?

Credit scores above 300 but below 620 are generally considered low AECB credit scores. This occurs when a person is irregular with loan repayment or paying off utility bills, has numerous bank accounts within a short span of time, and for several other reasons.

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What is the Need for an AECB Credit Score?

A credit score displays a person’s history of financial management, using which the provider institution can estimate their capability for future repayments. Maintaining a good credit score or a low risk credit score is crucial as it decides your creditworthiness and gets you better deals at affordable prices. 

In the following situations, the provider institution may examine your AECB credit score

  • When deciding whether to grant a credit card or loan to an individual
  • To determine the credit limit and loan amount for an applicant
  • For applicants looking to rent a home
  • When an individual applies to purchase any insurance policy with a provider in the UAE

Major Reasons for Low Credit Score

Plenty of reasons related to your financial history can impact your credit score. Discussed below are the key reasons for low AECB scores in the UAE:

Non-Repayment of Loans

It is one of the primary conditions on which your credit score depends. Whether you need a new credit card or another loan, every bank institution checks for your previous loan records. Here, if you failed to repay a loan previously, your credit score may take a hit. 

Due Bills

Being one of the most common reasons for the phenomenon, the untimely payment of regular bills can have a major impact on your credit score. Even a single delayed payment can lead to a low credit score. Completing a payment after the due date without informing the bank generally indicates improper management of finances on the applicant’s part.

Usage of Different Credit Cards

Operating several credit cards at once can often provide more benefits than using only one card at once in the form of rewards, more coverage limits, and more. However, users can often find additional financial burden at the time of paying credit card bills. This can quickly plummet your credit card score if left unchecked. 

Multiple Bank Accounts

Although possessing more than one bank account does not affect your credit score, opening multiple accounts in a short time period without any particular request can result in a bad credit score.

Request for Numerous Credit Cards

Applying for multiple credit cards in a short span can also be a factor leading to a bad credit card score. This impact on credit score is exacerbated if any of those applications are rejected, as all approved and rejected applications are also considered for your credit score calculation.

Steps to Have a Low-Risk Credit Score

Improving your bad credit score is not difficult once you are clear with the fundamentals of improving your credit score. The key concept here is consistency in your credit usage, which can include punctual repayments, below-the-limit credit usage, and so forth. Another aspect to keep in mind is that you can try to operate a single credit card for a considerable time for better maintenance of your finances using it. 

With the length of your account also impacting your credit score to a certain extent, you should avoid closing your accounts without properly settling pending repayments or dues. Finally, you can simply avoid applying for multiple credit cards or loans at a time. These easy steps, if followed for a considerable time, can eventually lead to a positive change in your credit score. 

Key Takeaways

Whether due to delayed loan repayments or multiple rejected credit card applications, several things can bring down your credit score. However, there is no need to panic as simply following the steps discussed in the article can support you in enhancing your AECB credit score and keeping up a low risk credit score. 

It is always advised to verify your credit score at regular intervals. However, while the AECB charges fees for the same, you can check your credit score for free with policybazaar.ae if you are applying for a financial service here. 

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