Everything You Need to Know About Credit Score
Are you aware of the credit score? Why is it so important? What is the use of a credit score? How it is calculated and why it is an important factor for availing a personal loan or credit card in UAE?
Well, your credit score is one of the key factors that banks or lenders consider while evaluating your credit card or loan application.
Let’s have a look at what credit score is all about, and how it is calculated.
What is the Credit Score?
A credit score is ideally a 3-digit number. The AI Etihad Credit Bureau (AECB) gives the credit report that includes your credit score. It has been determined by using the details which are found in the Accounts as well as Enquiries section of your credit history, including your credit cards and loan accounts, their payment status, and their outstanding payments days past due. Apart from this, it also considers previous finances, number of finances you have been applied for as well as the application status that is accepted or rejected by lenders.
In short, the credit score shows your creditworthiness on the basis of your borrowing and repayment history as shared by banks or lenders. Your credit score ranges from 300 to 900. The higher your credit score, the higher are the chances of getting a credit card or personal loan in UAE.
How is Your Credit Score in UAE Calculated?
Following are the key factors that help in determining your credit score:
- Payment History: Paying late your credit card bill or missing your loan EMIs leave a negative impact on your credit score.
- Credit Mixture: Having an adequate mix between unsecured and secured finances is likely to have a negative influence on your credit score.
- High Credit Utilization: Using your credit limit more than 30 percent takes a hit on your credit score. The reason being, a high credit utilization limit shows an increasing debt burden over time and also it indicates that you are a credit hungry person.
- Multiple Enquires: Too many finance enquiries may also take a toll on your credit score because it depicts that your loan burden might rise in the future.
How to Improve Your Credit Score in UAE?
Your credit score plays a pivotal role in deciding your eligibility for a personal loan or credit card in UAE at the bank. Because lenders check whether or not you are able to make the repayment or pay the bill at the right time through your credit score. That is why it is important to maintain a good credit score to get access to the credit card or any other finances. Here are a few useful tips that help in refining your credit score:
- Pay your outstanding dues always at the right time as late or missing payments leave a negative impact on your credit rating.
- It is vital to use the credit limit wisely. Experts recommend that one should use only 30% of their credit limit to maintain a good credit score.
- Credit card members are given the privilege of paying only 5% of their monthly bill. However, it leaves a negative impact on your credit score. Thus, it is recommended to pay your outstanding bills in full every month.
- Try to maintain a good credit mix of unsecured finances (such as credit cards & personal loans) and secured finances (such as auto and home loan). Because too many unsecured loans are considered negative for your credit score.
In A Nutshell
Hence, credit score is one of the most important factors that lender consider while sanctioning you personal loan or any other type of finances. Make sure you maintain a good credit rating and credit profile to achieve your financial goals.