Good News For Credit Borrowers in the UAE! Get a Chance to Improve Your Credit Scores

Are you tired of being rejected for loans or credit cards due to a poor credit score? Well, good news for UAE residents! You now have the chance to improve your credit score with a new initiative.

The UAE government along with the Al Etihad Credit Bureau is assessing a plan where individuals are not just docked of their credit points based on the defaults done but also get rewarded some points for keeping in line with better credit activities like credit card debt repayment, lower cheque bouncing rates, etc. This will allow the Emiratis to stand a better chance of securing loans and start afresh. 

What is a Credit Score?

Credit score is a three-digit number, ranging between 300 and 900 that reflects your credit habits. This includes past repayments, behaviour towards debt, cheque bouncing frequency, loan repayments, etc. It is generally used by the financial institutions to estimate an applicant’s creditworthiness and risk value.

The lower the score, the more difficult it is for a person to gain credit from any financial institution. However, a higher credit score gives lenders an insight into your responsible credit utilisation and low-risk borrowing tendency. This makes you eligible for higher loan amounts and longer repayment periods in the future.

Why is Maintaining a High Credit Score Important?

In the UAE, a credit score of 300 to 540 is generally considered to be “poor”and a score above 541-650 is still considered “bad”. Further, a score in the range of 651 to 710 is considered “fair” and anything above that is considered a “good” credit score.

The credit data is collected and stored with the al etihad credit bureau (AECB) regularly, which is a prime source of information for all the credit institutions.

Why is a good credit score important, you ask? A good credit score can help you secure loans, credit cards, and even rental properties. It can also result in lower interest rates and better terms and conditions for financial products. On the other hand, a poor credit score can limit your financial options and make it difficult to access credit when needed.

How is a Credit Score Calculated?

An individual’s credit score and the impact of various credit activities is evaluated based on the following lines:

• Past bill payment history - 35%
• Personal credit card debt - 30%
• Types of accounts - 10%
• Age of your personal credit - 15%
• Number of credit inquiries - 10%

Timeframe for Launch

AECB could introduce the rewards scheme as early as next year. “It will require a lot of analytics and (consumer behaviour) modelling and testing with our partners such as banks,” the CEO added. “Next year, we plan to significantly revamp and improve the credit scoring model.”

A Fresh Start

With this new initiative, UAE residents can now access their credit report through the Credit Bureau's website. The report provides information such as credit utilisation, payment history, and outstanding debts, giving individuals a clear understanding of their credit status. By monitoring their credit report regularly, individuals can identify areas that need improvement and take necessary steps to boost their credit score.

“Let’s say an individual gets laid off and misses two or three payments, that should not stick to the credit history for five years or more,” said Marwan Ahmad Lutfi, CEO of AECB. “As you start repaying on all the commitments on time, it takes anywhere between 6-12 months to get back to where you were on the credit rating.”

“Credit ratings typically work by penalising someone for non-payments. We want to change that, where for good behaviour, individuals can get a boost to their credit scores. If you fall short on something, there must be something that can offset that.”

“I don’t think such a scheme exists anywhere in the world – but the UAE is unique, we want to do things differently.”

The UAE Credit Bureau is a significant step towards improving financial literacy and empowering individuals to take control of their credit status. So, don't wait any longer, head over to the Credit Bureau's website and check your credit report today. With a little effort, you can improve your credit score and unlock a world of financial opportunities.