Why do credit scores matter in the UAE?

You know your age, your weight and perhaps even your blood cholesterol levels. But do you know your credit score? A significant number of UAE residents are unaware of the term, research shows, let alone that a credit score is perhaps the most important number when it comes to financial

What is a credit score?

Simply put, a credit score is an independently compiled three-digit number that indicates how likely you are to make loan and mortgage payments on time. The number lies between 300 and 900 and represents a borrower’s creditworthiness. The higher the number, the less risk you present to a lender. A rating above 700 is considered a good credit score in the UAE.

In the UAE, the Al Etihad Credit Bureau (AECB) is responsible for issuing credit scores. The organization was set up in 2014 to bring transparency to financial transactions in the country. The AECB puts together a credit report of financially active residents in the country by compiling data from loan, mortgage, credit card transactions and phone bills. Consequently, any UAE resident with any of these to their name will have a credit report and a credit score.

Your credit score is determined by your credit report. This includes your entire credit history in the UAE, from credit cards to loans, overdrafts, or other financial advances to your name. Your credit report also tracks your payment behavior, i.e., whether you pay your bills on time, if you’ve defaulted on payments, or if any of your checks have bounced. This data links back to your name and Emirates ID number.

How is your creditworthiness determined?

The AECB monitors over 2,000 data points across the UAE on a daily basis. These include banks, insurance companies, telecom operators and utility providers, as well as the UAE’s courts.

Your personal credit score, then, is calculated by assessing whether you make payments towards your credit card, insurance premiums and phone and electricity bills by the due date. Other factors affecting your score include the number of loans and credit cards you may have, how much you use such credit limits, and how late any missed payments are.

The score is dynamic and changes in line with recent payment patterns as reflected in your credit report. Missing a few months’ payments despite a stellar track record going back years, could lead to a significant rating drop.

Why is your credit score important in the UAE?

Lenders look up your credit score to determine how likely you are to repay your debts – and accordingly, whether or not you’re a good risk. Thus, your credit score plays a significant role in whether you are able to secure a loan or mortgage, or what sort of limit you may be offered on your credit card.

If an official from your bank phones up and offers you a higher credit card limit, you most likely have a healthy credit score. Conversely, if you’ve been refused a loan, a low credit score may be the reason why. People with higher scores may even obtain preferential interest rates from certain lenders.

For those reasons, you may want to know what your credit score is.

How do you find out your UAE credit score?

This being the UAE, there’s an app to help you access your credit score and your credit report. Simply download the free AECB app from the App Store or via Google Play. From there, it’s a four-step process:

• 1. Scan your Emirates ID
• 2. Register and create a new password
• 3. Pick a product, i.e., your credit score, your credit report, or both
• 4. Complete your purchase.

You can also get your credit report or credit score online, via the AECB’s website.

A third option is to visit one of the AECB’s two branches, in Dubai or Abu Dhabi.

How much does it cost to buy a UAE credit score and report?

On the AECB website at the time of publishing this article, the cost of purchasing a credit score is AED31.50, inclusive of VAT. The credit report costs AED84, and both together cost AED105.

How can you improve your credit score?

As we have noted, credit scores in the UAE can change with your past payment behavior. Therefore, it makes sense to follow a few best practices to keep your credit score high, such as paying your bills on time and not switching bank accounts too often. Healthy financial behavior will ensure a healthy credit score.

Every UAE resident should know their credit score and understand its importance to their financial wellbeing.

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