Here's why credit scoring is really a good thing for you

A good credit score should yield plenty of benefits, so it's worth taking steps to get your finances in order sooner.
Your score is a number that can tell a lender how risky you're likely to be to lend to
If you haven't heard yet, the Al Etihad Credit Bureau this month launched credit scoring, a new way of determining how risky it will be for banks to lend to individuals. We've known it has been coming for a while, but now that credit scoring is live, I figured it would be worth going into why it's a positive move for the UAE's personal finance industry.
First up, let's go into what credit scoring is. Essentially, your credit score is a number that can tell any prospective lender how risky you're likely to be to lend to. It can be anywhere between 300 and 900, with higher numbers indicating that you're less of a risk. How is the score calculated? Well, your banks and creditors will feed information about you to Al Etihad Credit Bureau, so whether you're constantly missing credit card payments, or you're constantly on time with loan payments, that information will be given to the bureau, who will then come up with your score.
Your score will be available to any bank or lender that you've applied for credit with. You can also go to the credit bureau and get hold of your score yourself - it'll tell you how risky you are, and the reasons why your score has come out the way it has.
Now, there's a lesson here from the get-go: if you don't keep on top of your finances - particularly your debt repayments - that'll be reflected in your credit score. You'll end up with a lower score, signifying that you're more of a risky borrower. That means that you might have a harder time applying for credit further down the line.
But it isn't all doom and gloom - if you're good at keeping up with your repayments, you'll suddenly find yourself first in line for financial products you're eligible for. Apply for a new credit card or loan, and a bank will see in your credit score that you're a good debtor, meaning they'll be more likely to lend to you. You should end up being spoilt for choice, so you'll have more freedom to shop around for better products.
Further down the line is where I really expect the benefits of credit scoring to be felt, though. Eventually, we could see banks offer preferential interest rates to borrowers with high credit scores - i.e., you'll be rewarded with cheaper finance for keeping on top of your debts. And there's even talk that your landlord or insurance company may be willing to offer better deals to less risky customers - once credit scoring has been properly accepted across the country.
For now, though, it's simply worth considering that credit scoring is here, and it's here to stay. This means it's more important than ever to keep on top of your debt repayments - a bad score may end up preventing you from buying that dream car, or from putting down roots by buying a home. A good score, meanwhile, should yield plenty of benefits further down the line, so it's worth taking steps to get your finances in order sooner, rather than later.
The writer is the CEO of compareit4me.com. Views expressed are his own and do not reflect the newspaper's policy.
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