Discover how the AECB credit score system in the UAE works, how it’s calculated, how it affects mortgage applications, and what you can do to improve it.

Introduction

Unless you are one of the fortunate few who have the luxury of buying a property in Dubai for cash, you are more likely to consider getting a mortgage loan to purchase your new home or future investment. Even if you have enough savings to cover the price, it’s always better to leave some of your savings intact for furnishing, improvements, in case of unexpected expenses, or as a rainy day fund. Mortgage loans are one of the biggest financial commitments between a bank or lender and a borrower and as such requires both parties to be thoroughly examined before closing the deal. All UAE banks are regulated by the Central Bank of the UAE and must adhere to certain requirements when issuing loans. In turn, borrowers must be trustworthy and be able to pay the loan back. The most common way to establish a borrower’s eligibility and creditworthiness is to examine their credit history.

Many countries around the world examine clients’ credit scores for this very reason, and each of them has their own system for calculating it. So in the following sections, we will look at the credit score system in the UAE, how it’s calculated, how it affects the mortgage application, and some best practices to improve it if you need to.

AECB credit score

A credit score is essentially a result of your credit report. It’s a 3-digit number in the range from 300 to 900 estimating an individual’s creditworthiness, or the ability to pay back a loan. The higher the number the better your creditworthiness is. A credit report is a detailed statement of a person’s credit history mostly focusing on the individual’s ability and regularity in repaying debts. In the UAE, credit reports are issued by the government organization AL Etihad Credit Bureau (AECB) launched in 2010. The report draws information about the borrower from different sources, namely banks and lenders, as well as credit card and telecom companies.

This system helps financial institutions make an informed decision when reviewing a mortgage application and, in turn, avoid bad loans, complications, and losses from dealing with clients who have poor credit. While some banks may have a minimum credit score they would accept for a mortgage loan, some of them also have benefits for clients with higher credit scores, like lower interest rates and more favorable conditions.

Checking your credit score in the UAE is much simpler than compared to the US for example. Simply visit the Al Etihad Credit Bureau (AECB) website AECB.gov.ae, or download their mobile app from Google Play or the Apple Store. The reports are issued for a fee: AED 84 for a full report and AED 10.5 just for the credit score. You need to log in or register with your Emirates ID, choose a credit report or a credit score option, and then pay the fee. It’s that simple and fast.
Al Etihad Credit Bureau (AECB) application screenshots.
Al Etihad Credit Bureau (AECB) application screenshots.
Al Etihad Credit Bureau (AECB) application screenshots.

How is a credit score calculated?

The AECB aggregates over 2000 data points from different sources (banks, lenders, credit card, and telecom companies) and examines a number of factors in an individual’s credit history to determine their credit score. The main factors that are examined here influence the score in varying degrees (in approximate values) and are as follows:
  • Payment history (35%) - the credit card and bill payment history is the most important factor and is based on timeliness or lateness of all recorded payments with more recent ones carrying the most weight.
  • Debt accumulation (30%) - the amount accumulated through loans and credit card debt based on the entire amount owed is the second most important factor. This represents the difference between the credit card limit and the current credit card balance.
  • Length of credit history (15%) - depends on how long bank accounts, credit cards, and other credit instruments have been used. It takes the average age of all accounts, cards, and instruments and determines the length of the individual’s credit history.
  • Account types (10%) - the types of accounts also play a role in determining an individual’s credit score. Both retail bank accounts and revolving or installment credit accounts and how they are managed are taken into account.
  • Number of inquiries (10%) - the number of credit report inquiries or newly opened accounts in a short period of time can have adverse effects on the credit score. A few won’t negatively impact the score, but several may raise some questions and an investigation into the reasons behind these actions.
Al Etihad Credit Bureau report and credit score review example.

How to improve your credit score

The higher your credit score, the better, but what is considered a good credit score? A typical range and valuation of the scores is shown in the table below:
Credit score range Valuation Risk level
300 - 540 Poor Very high risk
541 - 650 Bad High risk
651 - 710 Fair Medium risk
711 - 745 Good Low risk
746 - 900 Excellent Very low risk
Even if you’re not in the lower ranges there are still benefits to improving your credit score, such as lower interest rates, employment opportunities, reduced insurance premiums, priority when renting apartments, etc. The score is dynamic and it changes based on the most recent actions in your credit history. There are a number of ways to improve your credit score so below is a list of the most common and effective ways of achieving this:
  • Paying bills on time - paying utility and phone bills, credit card debt, property taxes and service charges on time
  • Clear outstanding debt - resolve any outstanding debt as soon as possible, without incurring a new debt to do so
  • Avoid repayment delays - stick to the loan repayment schedule and avoid any delays if possible
  • Manage multiple credit accounts - if you can manage multiple credit accounts properly, this will increase your score
  • Increase account credit limit - increasing your credit limit should have an immediate effect on your credit score
  • Become an authorized user - if you become an authorized user on a relative’s account with a high credit rating, this will benefit your score as well
  • Lower credit utilization - aim to use your credit cards up to the recommended limit
  • Correct errors quickly - if there are any errors negatively impacting your credit history, rectify them quickly
  • Long-term credit - long-term loans and credit cards positively impact your credit score

There are also notions out there that certain other factors can influence your credit score, which can lead to misinformation, so here is a list of factors that don’t have a direct impact on your credit history to keep in mind:
  • High annual income - income doesn’t have a direct impact on a person’s credit score, but rather the ability and history of paying one’s bills and debts on time is what is measured (you can have good credit with minimum income)
  • Marriage - marriage has no impact on an individual’s credit score, only joint or shared accounts will have any effect
  • Avoid repayment delays - stick to the loan repayment schedule and avoid any delays if possible
  • New credit card application - new applications are not considered a problem unless there have been multiple applications at different financial institutions, as this may be seen as suspicious behavior and prompt further investigation
  • Unemployment - employment status doesn’t directly influence the credit score, as long as you pay your bills and debts on time and can manage your liabilities using your savings, the credit score won’t be negatively affected 

If you don’t have a credit score this doesn’t mean that you have bad credit and can’t get credit or a loan. It will be more difficult, but you can use other forms of credit or loans to show banks or lenders that you are able to repay your debts on time, whether it be a secured credit card or a secured loan.
Low-angle photography of high-rise buildings in Dubai, UAE.

Going forward

Now that you have a better understanding of credit reports, the credit score in the UAE, and how it affects your ability to get a mortgage you can take measures to prepare for your home purchase or investment beforehand and approach the mortgage application ready and with a high credit rating. If you need advice on how to prepare and what the requirements for a mortgage loan are, you can check out our blogs for more information on required documentation, eligibility conditions as well as our guide through the process itself. Or you can contact our mortgage advisors for a free consultation. We specialize in helping UAE nationals, expat residents, and non-residents alike.

If you are looking for a property in Dubai browse our portfolio of over 5000 properties and let us help you find that perfect home or future investment. If you are examining your options and planning your financing, use our mortgage calculator to estimate your loan amount, monthly installments, and even predict your investment’s rental profit so you can organize your finances accordingly.
Photo credits:
  • Freepik | Freepik
  • App screenshots and Al Etihad Credit Bureau report | AECB
  • Denys Gromov | Pexels 

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