Wealth creation does not always follow as a result of tremendous business acumen and a million dollar idea – it often starts with good personal finance habits. Creating wealth becomes a little easy with regular saving, being punctual about payments, minimising borrowing (such as taking loans) and making timely investments for the future.
How you spend your money and manage your financial life reflects on your credit score. Your credit score is calculated vis-à-vis several factors, all of which are underlined by diligence and a great deal of fiscal responsibility. A low credit score makes it difficult for an individual to secure loans, get credit for financial ventures, or even apply for credit cards from Dubai’s leading banks.
If your credit score is not as desirable as you would like, there are ways to improve it. Try these:
#1 Be regular with all payments.
One of the best personal finance habits to inculcate is to make all bill payments the moment the bill arrives. From phone to credit card bills, each must be paid well within the due date not just for your peace of mind, but because this responsible behaviour goes a long way in building a good credit score for you. Paying bills early, or regularly within the due date window, tells potential lending institutions that you can manage your outstanding payments responsibly and comfortably. On the other hand, late payments label you as a ‘high risk’ candidate for credit cards and loans.
#2 Work on existing debt and your repayment record.
A high credit score is also determined by how you deal with past and current debt. You may have borrowed a loan to buy a car, or a personal loan to remodel your home, or even a credit card loan. Whatever the type of borrowing, you must ensure that you repay the debt on time and without defaults. Defaulting on EMIs, or not repaying the loan within its tenure, puts your credit score at grave risk. Banks and financial institutions in Dubai study your past repayment record to gauge if your future repayment behaviour is likely to be a responsible one. It might even go against you when you try to apply for credit card in Dubai – your application might be stalled or ultimately rejected.
#3 Don’t max out your credit cards.
Most people scupper their credit scores with their (mis)use of credit cards. Don’t let this happen to you. Whether you have one or multiple credit cards, it never helps to ‘max’ them out. If using diverse credit accounts, make sure that you maintain them all diligently in terms of bill payments, but use a maximum of one or two credit cards regularly while leaving the rest as backups. In fact, restrict your credit card usage as much as possible when trying to build a good credit score: you might be diligent about paying your card bills, but using even 90% of your cards (cumulatively) sets your credit score back by a fairly high number. Banks will check how many credit cards you have and what the payment status is like when you apply for a credit card in Dubai.
#4 Avoid ‘negative’ financial elements.
There are several ‘negative’ elements in personal finance that most people are unaware of. These are: stacking up high credit card debt, taking high interest credit card loans, loan EMI defaults, delinquency, delay in paying bills, hard inquiries, unpaid taxes, bankruptcy and collections. Having even one of these negative elements on your financial record can lower your credit score considerably, so avoid all of them always.