Financial institutions or lenders when giving out loans to anyone the first and the most important thing they check is the credit score of the applicant
What is a credit score?
A credit score is a 3 digit number that decides if you can make the loan and credit card payments in time. Banks or lenders when giving out a loan emphasize on giving loans to people with a good credit score.
Credit score varies from country to country. Many credit scoring companies have different ranges of scores based on their model of evaluation. But when in UAE, the applicants are analyzed based on the scores defined by the Al Etihad Credit Bureau.
What causes a bad Credit Score?
A person’s financial history is what describes if the credit score is good or bad. The factors which cause the credit score to drop are:
- Defaulting on a loan: Not being able to pay the monthly installments
- Late payments
- Defaulting on payments: Not paying your credit card bills timely.
- Filing bankruptcy etc.
Applying for a loan with a bad credit score is not that difficult. It’s not like you won’t get a loan, but it would cost a lot more than it does to people with a good credit history.
Some lenders have their ranges of credit scores. If your scores fall below the range, then the lender might not approve you for a loan. But if your scores are above, the lender may be more likely to open up your credit reports to see your credit history. The lender may then factor in other things, to decide whether to offer you a loan, like your debt-to-income ratio and at what interest rate.
With a bad credit score, it is doubtful that any lender or any financial institution would give you a long term loan, but short term loans have a high chance because they don’t require much in-depth and detailed credit checks.
Having a bad credit history does not mean that you can’t do anything about it. Even if you file bankruptcy, you can still work and improve your credit history.
Here are a few you things for improving your credit history
- Pay off your debts
- Make timely payments for utility bills and telephone expenses.
- Keep low balances on credit cards or any other cards.
- Resolve any disputes of any inaccuracies on your credit report.
In the UAE, one cannot leave the country without clearing his/her debts. The country has strict laws on such matters. But considering the financial industry of the country, there are chances that you might find some reputable lenders who might be willing to lend you.
The bottom line is that having a bad credit history does not mean that your world has ended, and you cannot borrow any more. One can take personal short term loans and improve his/her credit history by making the payments timely. It is best advised to make sure not to default in the first place, but if that happens due to some reason, then one can always improve his/her credit history.