Every banking customer in the UAE is well-acquainted with the concept of the credit score — it’s that three-digit score assigned to an individual that plays an important role in deciding one’s eligibility for a loan or credit card at the bank.
The Al Etihad Credit Bureau (AECB) provides the credit report, which includes the credit score of an individual. It collects financial information of an individual from various sources and generates a report by analysing the details.
This report is used by the financial institutions to determine the loan repayment capability of the applicant.
What does a credit report say?
AECB gathers the information of an individual from banks, financial institutions, and telecom companies and forms a single report.
Some banks provide their customers’ information once in a while, whereas others like the Union National Bank follow the daily data submission approach.
This helps AECB update the reports of the individuals quickly without any delay when needed.
The report consists of the relevant financial information like the number of loans, credit cards, how frequent the credit instalments are being paid, due dates and delayed payments, skipped payments, utilization of the credit limit, number of debit cards held, bounced cheques, etc.
Along with the summary of existing loans, it also lists out previous loans and details of the number of loans applied for and the application status i.e. accepted or rejected by the banks.
All these details gathered in the report will generate a score that is popularly known as the credit score.
Higher the score, the higher the probability of getting a loan approved.
Usually, if the credit score is above 700, it is considered a good score.
If it is below 700, then the individual must improve it.
Commercial Credit Score
AECB not only provides the credit analysis of an individual but also for the companies in the UAE.
This commercial credit score will help a bank while approving a loan for a company. Businesses can get their credit score by visiting any of the AECB centres with their trade licence and a letter requesting for credit score signed by the manager, owner or partner of the business.
It must also be signed by an authorized bank in the UAE.
Certain fees are levied to provide credit reports. AECB charges Dh105 for a credit report including score. Individuals can also get just a credit score exclusively for Dh31.50 and a credit report for Dh84.
Commercial credit score (or credit score for companies) costs Dh220 at the time of writing this article.
Is the AECB credit report beneficial?
In case of a secured loan, banks provide credit based on collateral. This can be a bit risky in the case of unsecured credit options, such as personal loans, credit cards, etc.
So to determine the creditworthiness of an individual, financial institutions ensure to get a quick financial background check which can be determined with the help of a credit report.
So any individual applying for a loan or credit card must make sure they have a good credit score in order to avoid rejection.
How to get a good Credit Score?
As specified above, a score that is above 700 is noted as a good credit score. Some factors that can help in maintaining a good credit score are:
• Paying bills on time — This is a very common yet important way everyone suggests with regards to the credit score improvement. Even a one-day late payment also will be added to the credit report and can have an impact on the credit score.
• Credit utilisation — Despite the credit limit, it is important to utilize the provided credit wisely. It is recommended to use only 30 per cent of your credit limit.
• Pay credit card bills in full - Credit cardholders are given a provision of paying only 5 per cent of the credit bill monthly. But this can have a negative impact on your credit report. Therefore pay the bills in full on time.
• Managing debts — Try clearing the loans that are consuming high-interest rates. Have fewer debts in your pocket. Don’t apply for a loan that you don’t need.
• Credit card accounts — There is often a misconception that having too many credit cards will have a positive impact on the credit score. The number of credit cards has nothing to do with the credit score. The way these credit cards are utilized plays a major role.
Ways to access the credit report
Earlier you could get your credit report or credit score by visiting AECB centres or filling the online form on the website. Now AECB has its mobile app where individuals can log in using their SmartPass credentials or else create a new account.
Once the security questions are answered, they can pick the type of report they are looking for. This will be followed by the payment step. After the transaction is completed, the credit report/score will be mailed to the registered email address within 30 minutes.
A credit score has become the most important factor. None of the banks in the UAE process a loan without studying the credit report of the applicant. So try to get a good credit score and maintain it.
Shiv Gupta is the co-founder of mymoneysouq.com, a market place for personal finance products in the UAE. The views expressed here are his own.