In the UAE, your credit score is maintained by Al Etihad Credit Bureau (AECB). It ranges from 300 to 900, with high scores indicating better credit. Banks, financial institutions, zamindars, and even some employers check your credit score before making decisions about loans, credit cards or other financial agreements.
After a debt disposal, your credit score may fall as the lenders see systematic loans as a sign of financial crisis. However, it is not permanent – you can take steps to restore and improve your credit standing over time.
Understanding Credit Scores in the UAE
In the UAE, your credit score is maintained by Al Etihad Credit Bureau (AECB). It ranges from 300 to 900, with higher scores indicating better creditworthiness. Banks, financial institutions, landlords, and even some employers check your credit score before making decisions about loans, credit cards, or other financial agreements.
After a debt settlement, your credit score may decline because lenders see settled debt as a sign of financial distress. However, this isn’t permanent—you can take steps to restore and improve your credit standing over time.
Step 1: Check Your Credit Report Regularly
The first step to improving your credit score is understanding your current financial position. Request a copy of your credit report from AECB to check for:
- Outstanding debts that may still be unpaid.
- Errors or incorrect information affecting your score.
- Updates on your settled debts.
If you find any mistakes, dispute them immediately with AECB to ensure your report accurately reflects your financial status. A clean and updated credit report is essential for improving your score.
Step 2: Make Payments on Time
Payment history is one of the most important factors in your credit score. After settling your previous loans, focus on timely paying for all your balance and future financial obligations.
- Always pay your credit card bill, loan and utility bill before the due date.
- Set automatic payment or reminder to avoid late payment.
- Even if you cannot pay the entire amount, always pay at least minimum to maintain positive records.
A consistent time payment history will gradually promote your credit score.
Step 3: Reduce Your Credit Utilization Ratio
Your credit utilization ratio is the amount of credit you use than your total credit limit. If you maximize your credit card or keep a high balance, it negatively affects your score.
- Keep your credit use below 30% -For example, if your limit is AED 10,000, try not to use more than 3,000.
- Pay the outstanding balance as soon as possible.
- If possible, request a credit limit increase from your bank to reduce your use percentage without increasing the expenditure.
Maintaining a low use ratio signals that you are responsible to manage credit responsibly.
Step 4: Avoid applying for too many credit products
Every time you apply for a new credit card, loan, or financing option, banks “hard inquiry” on your credit report, which temporarily reduces your score. By applying for too many credit products in a short time, lenders feel that you are financially unstable.
- Apply for credit only if necessary.
- If you are rejected for a loan or card, wait for at least six months before applying again.
- Consider using pre-elastic proposals from your bank, as they often do not require hard inquiry.
Being alert with new applications will help your score to recover faster.
Step 5: Use a Secured Credit Card
If banks are hesitant to approve you for a regular credit card due to your past debt settlement, consider getting a secured credit card. A secured credit card requires a security deposit, which serves as collateral. It helps you:
- Rebuild credit history while avoiding overspending.
- Show banks that you can manage credit responsibly.
- Improve your credit score by making regular, on-time payments.
Over time, responsible use of a secured credit card can lead to approval for better financial products.
Step 6: Diversify Your Credit Mix
Having different types of credit accounts can positively impact your credit score. Instead of relying solely on credit cards, consider responsible use of other financial products like:
- Personal loans with fixed payments.
- Car loans or installment plans with regular payments.
- A mix of short-term and long-term credit to show lenders you can handle different types of financial commitments.
Having a healthy mix of credit types and repaying them responsibly strengthens your creditworthiness.
Step 7: Keep Old Credit Accounts Open
The length of your credit history also plays a role in your score. If you have an old credit card or account in good standing, don’t close it—even if you don’t use it frequently.
- Older accounts add to your credit age, which is beneficial.
- A long, positive credit history shows lenders that you have a track record of managing credit well.
- If the card has no annual fees, keep it open with minimal usage.
Maintaining older accounts with low balances and on-time payments contributes to score improvement.
Step 8: Be patient and consistent
Restoring your credit score doesn’t happen overnight. In the UAE, AECB updates credit scores regularly, and improvements are reflected over time. To ensure steady growth:
- Follow a disciplined financial plan and avoid unnecessary debt.
- Track your progress by checking your credit report every few months.
- Avoid risky financial behaviors, like missing payments or accumulating new debt.
On average, significant improvements can be seen within 6-12 months, depending on your financial habits.
Regaining financial strength after debt settlement
A low credit score after debt settlement is not permanent. With consistent efforts, responsible financial management, and patience, you can rebuild your creditworthiness in the UAE.
- Start by checking your credit report and correcting any errors.
- Make timely payments and keep your credit utilization low.
- Use secured credit cards and diversify credit types to build a strong financial profile.
- Avoid unnecessary credit applications and maintain old accounts.
- Stay disciplined and track your progress over time.
