What is a Good Credit Score in UAE?

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    A credit score, a three-digit figure that ranges between 300 to 900, is widely used as an indicator of your debt-paying capacity. It is often deployed by financial institutions to estimate the applicant’s creditworthiness and their behaviour towards debt, past repayments, related risks, and any other type of defaults. 
     
    As a good credit card score generally implies lower credit risk, lending institutions can find it easier to make decisions regarding credit card issuance, loan application processing, and other financial assistance to the clients. This article will elaborate on what is a good credit score in the UAE, why is it vital to have a good credit score and the myths around a good credit score.

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    What is a Good Credit Score?

    A credit score of more than 700 is generally recognised as a good credit score in the UAE. Such a credit score in UAE usually translates into quick credit approvals with higher amount limits and lower interest rates for individuals. 

    The following is the general credit score range in the UAE:

    • Bad Credit Score Range - 300 to 619
    • Fair Credit Score Range - 620 to 679
    • Good Credit Score Range - 680 to 730
    • Excellent Credit Score Range - 731 and above

    Procedure for Checking the Credit Score

    You can log in to the AECB website to easily access your credit score. Individuals can receive a copy of their credit report for AED 84 (besides VAT), while the fee for the companies to avail of the same is AED 157.5 (plus VAT). 

    The credit report includes credit scores and personal details such as:

    • Colour-coded records of payments for the last 24 months - If a scheduled payment was postponed by more than three months, you will find a red box. For three months past the due date, the colour is yellow while the payments that are on time are marked in green.
    • Number of active loans and credit cards
    • Loan applications and rejections 

    Other than these, you will also be able to see the previous balances and the number of cards used if you are a credit card user.

    Why is it Important to Have a Good Credit Score?

    Banks and other financial institutions look into your credit score when you apply for a credit card, a loan, or any other financial product. While the banks don’t specify credit score limits, the score has a significant impact on the approval or rejection of your application as well as the offered terms and conditions. 

    For instance, if your credit score is below 400, most banks in the UAE will not approve your loan application. Some banks, on the other hand, don’t accept a score below 500. Ultimately, when you have a good credit score, often referred to as a good credit card score in the country, you can avail of a loan plan at affordable rates and a greater range of benefits. 

    Benefits of Having a Good Credit Score in the UAE

    • Low-interest rates on loans and credit cards - When you have a good credit card score, say above 700, you will be able to can avail of loans at lower interest rates. Individuals with a good credit score can even get an extension on the credit limit. Finally, such individuals can also bargain regarding the interest rate and the loan amount when they file an application for a loan. 
    • Easy loan approvals – While the offered loan limit highly depends on your income, a bad credit score can reduce the possibility of you getting a loan irrespective of your income. When you have a good credit card score, the chances of getting loan approval as well as favourable loan conditions are high. The reason behind the phenomenon is that a good credit card score helps in convincing the lenders that the applicant has the required capacity and acumen to repay the loan. 
    • Employment opportunities – Although mostly used by financial institutions, it is not uncommon for employers to examine a candidate's credit score. A poor credit score, besides indicating irresponsible lifestyle choices and a lack of financial prudence, can also signify excessive debt, which could ultimately impair a candidate's ability to function at work. So if you are searching for employment, reviewing your credit rating and boosting it is as crucial as planning for a job interview. 

    Myths Pertaining Good Credit Card Score 

    A higher salary implies Higher Credit Score

    Most individuals believe that having a higher salary will improve their credit score. Your salary, however, has minimal impact on your credit score. While your salary will be considered when you apply for a loan or a feature credit card, it is still not related to your credit score which depends more on the punctual repayment of your bills and other financial obligations.

    Money in the bank indicates a good credit card score

    The amount in your bank account is not factored in the calculation of your credit score. Bank balances and debit cards have a negligible impact with respect to your credit scores. An individual can often have a negative credit rating with a large bank account.

    No debt implies a good credit score

    Your debt is unquestionably a factor in determining your credit score. However, a lack of debt doesn’t always imply a good credit score. Other factors affecting your credit score include your credit record as well as the timely (or untimely) repayment of your previous mortgage and credit cards.

    A good credit card score is not necessary

    While having a good credit score will not raise your capital or money, it will affect your borrowing capacity from any bank or financial institution across the UAE. However, a key aspect to remember here is that earning a “perfect” score is not as important after a certain level as in the lower score ranges. Your application will be mostly considered if your credit score is in the good range, whether on the higher side or in the middle.

    You can improve your credit score by closing cards

    Attempting to close credit cards without proper settlement can actually have a negative impact on your credit score. Moreover, it will also impact the aspect of duration regarding your credit record, ultimately lowering your credit score over time. The age of your credit record is a crucial factor in terms of credit score. Generally, an older credit record indicates successful management of finances over a long period, which is favourable from the lender’s perspective.

    Key Takeaways

    Any score above 700 implies a good credit card score in the UAE, generally signifying that the person is credible enough to pay off their debt. There are four ranges of credit scores generally followed in the UAE - 300 to 619 (bad credit score), 620 to 679 (fair credit score), 680 to 730 (good credit score), and 731 and above (excellent credit score). At a nominal fee, you can access your credit score or even your credit report on the AECB website. 

    Having a good credit card score makes it easy for you to secure a loan at lower interest rates and more favourable terms. At times, some employers may also examine an applicant’s good credit to gauge the potential employee’s history of financial management. 

    Several myths are associated with a good credit card score such as high income implying a good credit score, massive bank balance indicating a good credit score, no debt translating into a good credit score, and more. However, none of these statements are true. While a good credit card score may not help you directly enhance your wealth, it can lead to better financial opportunities when availing of a product and better savings. 

    Note: If you apply for a credit card or a similar financial product with policybazaar.ae, you will be able to verify your credit score in UAE for free.

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