Improve Your Credit Score: A Guide to Buying Property in Dubai

Purchasing a property in Dubai is a dream for many, whether it’s for you to live in or for investment purposes. However, securing a mortgage in Dubai often depends on having a good credit score. Your credit score reflects your financial health and is a key factor lenders use to determine your eligibility for a loan. If you’re planning to buy property in Dubai, here are some actionable steps to improve your credit score.

Understanding the Importance of Credit Score

Your credit score is a critical factor in determining your financial health. In the UAE, it is calculated by the Al Etihad Credit Bureau (AECB) and the score ranges from 300 to 900. A higher score demonstrates a good worthiness, increasing your chances of securing a mortgage. Banks use your credit score to assess the risk of lending to you. For example, a score closer to 900 indicates consistent financial responsibility, while a lower score suggests potential risk for the bank. A good credit score is not just used for loan approval; it can also provide better interest rates from banks, saving you thousands of dirhams over the life of a loan.

How can you Check Your Credit Score?

Knowing your credit score is the first step to improving it. In the UAE, you can check your credit score through the Al Etihad Credit Bureau (AECB). Here’s how you can do it in detail:

• Online Access: Visit the official AECB website or download their mobile app, available for both iOS and Android. Create an account if you’re a first-time user.
• Required Documents: Ensure you have your Emirates ID and a copy of your passport. You may also need to provide your mobile number registered with AECB for verification.
• Payment: There is a fee to obtain your credit report, typically ranging from AED 50 to AED 150, depending on the level of detail in the report.
• Review Your Report: Once obtained, thoroughly review your credit report. Look for any errors, such as outdated information, incorrect account details, or errors in loan repayments.
• Dispute Errors: If you find inaccuracies, contact AECB immediately. You can raise disputes, and resolving such errors can improve your score.

9 Ways to Improve Your Credit Score in the UAE

• Pay Your Bills on Time: Timely payment of bills is one of the most important factors affecting your credit score. Ensure that you pay all your credit card bills, utility bills, and loan EMIs on or before the due date. Set up reminders or automate payments to avoid missing deadlines.
• Manage Your Credit Card Utilization: High credit utilization—the ratio of your credit card balance to your credit limit—can negatively impact your credit score. Aim to keep your utilization rate below 30%. If possible, pay off your credit card balances in full each month. If you struggle with high balances, consider requesting a credit limit increase or using balance transfer options to lower your utilization.
• Avoid Applying for Too Much Credit: Each time you apply for a loan or credit card, a hard inquiry is made into your credit report, which can lower your score. Be selective about applying for new credit and only do so when necessary. 
• Avoid Bouncing Cheques: In the UAE, bounced cheques can have a bad affect on your credit score. Ensure you always have sufficient funds in your account to cover issued cheques. Regularly monitor your account balances and set up alerts for low balances to avoid accidental overdrafts. 
• Diversify Your Credit Portfolio
• Banks prefer to see a mix of credit types, such as a combination of credit cards, car loans, and personal loans, managed responsibly. However, avoid taking on unnecessary debt just to diversify your credit mix. Instead, focus on managing existing credit responsibly to build a positive credit history.
• Maintain Older Credit Accounts: The length of your credit history also helps in keeping your score high. Keeping older credit accounts open can help maintain a longer credit history. If you no longer use a particular credit card, consider keeping it open with random small purchases to maintain account activity.
• Monitor Your Credit Report Regularly: Regularly checking your credit report can help you spot errors and monitor your progress. Look out for fraudulent activities, such as accounts or transactions you didn’t authorize, and report them. Utilize credit monitoring tools provided by AECB or third-party financial apps.
• Consolidate Debt Where Possible: If you have multiple loans or credit card balances, consider consolidating them into a single loan with a lower interest rate. This simplifies repayment and can potentially boost your credit score if managed responsibly. 
• Consult a Mortgage Advisor: If you find it challenging to manage your debts or improve your score, consider consulting a financial advisor. They can offer strategies to help you achieve your goal of owning property in Dubai. Financial experts can also assist with budgeting and debt repayment plans to ensure sustainable improvement.

Tips for Not to Miss out Your Bill Payments

Preparing for Mortgage Approval to Buy a Property in Dubai

• Save for a Down Payment: In Dubai, down payment requirements typically range from 15% to 25% of the property value for residents. Start saving early to ensure you meet this requirement.
• Organize Financial Documents: Gather all necessary documents, including salary certificates, bank statements (usually for the past 6 months), and identification papers such as your Emirates ID and passport. 
• Assess Your Debt-to-Income Ratio: Banks evaluate your debt-to-income ratio to determine your ability to manage monthly mortgage payments. Aim to keep your DTI below 40% for better chances of approval.
• Clear Outstanding Debts: Pay off any lingering debts to improve your creditworthiness and free up more of your income for mortgage payments.
• Maintain Stable Employment: Banks prefer applicants with stable jobs and consistent income. Avoid changing jobs during the mortgage approval process.
• Avoid New Credit Applications: Avoid applying for new loans or credit cards, as this could negatively impact your credit score and raise red flags for lenders.

Applying for a Mortgage for Buying a Property in Dubai

• Research Mortgage Providers: Compare offerings from various banks and financial institutions in the UAE. Look for competitive interest rates, flexible terms, and features such as early repayment options.
• Pre-Approval: Obtain a mortgage pre-approval to understand your borrowing capacity. This also strengthens your position as a serious buyer when negotiating with sellers.
• Submit Required Documents: Provide necessary documents, including your Emirates ID, passport, salary certificate, bank statements, and proof of address. Some lenders may also require details about the property you intend to purchase.
• Understand the Costs: Be aware of additional costs, such as processing fees, valuation fees, and mortgage registration fees, which can add up to 5% of the property value.
• Choose the Right Mortgage Plan: Decide between fixed-rate and variable-rate mortgages based on your financial stability. 

Improving your credit score is not an overnight process but a steady journey of responsible financial management. By following these tips and maintaining a good score, you’ll be well-prepared to get the mortgage you need to buy your dream property in Dubai. A good credit score not only increases your chances of approval but also opens doors to better financial opportunities. Start taking the necessary steps today, and turn your property ownership vision in Dubai into a reality.