KT For Good: Swiping cards often? Be mindful of credit scores

There are nearly three million people using various credit facilities in the UAE.

We live in a credit-dominated society, where arguably every material need can be funded by a financial institution and can be paid in easy monthly instalments. Yes, easy access to funds has pushed some into the quicksand of financial debt, but for a majority it has made life more convenient. There are nearly three million people using various credit facilities in the UAE, be it in the form of credit cards or loans, as per the Al Etihad Credit Bureau (AECB). Each user on an average has access to more than 2.5 credit lines.
So whether you are among the three million who avail of the credit facilities or a student, person looking for a job, you should be mindful of the credit score and reports issued by the AECB. The credit bureau is keeping a tab on all our financial dealings in the UAE and assesses it to create a report that gives a fair idea of how likely are we to honour our financial liabilities. 
"The UAE is very nimble in establishing international best practices here. In just a few years, the country has ensured coverage of 99.9 per cent of people under the Emirates ID. Likewise, the AECB has been increasing its collaborations at a fast pace and soon credit scores and reports will be vital for all payment related services," says Damodhar Mata, a financial advisor based in the UAE.
AECB has over 100 subscribers as of now, who use credit scores and reports to gauge credit worthiness of a person, and these are not just our regular banks and financial institutions. "Last year, we started getting requests from non-financial institutions as well to gain access to credit information," says Marwan Ahmad Lutfi, CEO of AECB.
The telecommunication companies, car rental and some government entities have also approached the credit bureau to seek information. The pace at which the bureau is synthesising and processing our credit information, it shows the maturing financial landscape of the country. Access of credit reports by landlords, banks, telecom companies, and others is likely to make many of us financially more responsible and astute in our dealing. It could well save many from amassing unsustainable debt, too.
However, the first step is to actively get this report and make an effort to read and understand it. "At present, people who have been rejected by banks come to us for reports. Whereas people in general should consciously access this report to know their credit standing. We are trying to create more awareness on this front," adds Lutfi.
AECB issues a three-digit credit score ranging from 300 to 900. A score of 300 to 619 can be interpreted as poor, a score of 620-679 falls in the category of fair. A good score can be anywhere between 680 and 730, and anything above 730 is excellent.
"A low credit score doesn't remain low forever. A credit score can decrease at times, but it can improve if the payments are made on time. If the credit score is low, don't worry. You can boost it easily by sticking to the payment timelines on your loans and credit cards," advises Nikhil Rastogi, co-founder, mymoneysouq.com.
Credit reports and scores can be requested from the AECB website.
suneeti@khaleejtimes.com

All you need to know
What is a credit report?
It has all your personal details, national identity number, current and previous addresses in the UAE, employment details, and salary.
Your credit score predicts on whether you will make your loan and credit card payments on time. The higher the score, lower the risk of default or late payment.
What are the details of the credit facilities availed?
Payment history for two years. It is colour coded: green is good, yellow indicates a payment delay of 60 to 90 days and red means payments delayed by more than 90 days.
What is a credit score?
Your credit score is a three-digit number, ranging between 300 and 900. A low score indicates a high risk. A high score likewise indicates a low risk to the financial institutions. Credit score is calculated using information from various sources, such as banks, finance companies, telecom companies. The score is dynamic and changes according to your credit and payment behaviour on a daily basis.

Why is it important?
Banks use your credit score to process your loan and credit card request. The credit score will help also financial institutions make better informed decisions. In countries such as the US and UK, credit scores are increasingly used to decide the interest rate on a loan. Higher the score, lower the interest rate. In the UAE, your credit score could be used by telecom companies, landlords, and retailers to give you even more benefits in the near future.

• KT For Good