How to Buy a House with Low Credit Score in UAE?

With the development of real estate in the UAE, one can find several properties for the purpose of residence there. This demand is recognised by financial institutions, which, in turn, have made numerous home loan plans available for the same. 

However, with credit scores being one of the primary factors in the approval or rejection of home loan applications, individuals with scores on the lower end may face the dilemma of whether they can get a home loan for low credit score in the UAE. For this, it is necessary to keep in mind that even with the challenges present, you can still get a home loan in UAE with a low credit score. 

Discussed below are all the things an individual with a low credit Score should know regarding home loans in the UAE. 

An Overview of Credit Score in UAE

Here is the general categorisation of credit scores followed in the UAE:

Credit Score	Category	Star Rating
300-540	Very Low	1
541-650	Low	2
651-710	Medium	3
711-745	High	4
746-900	Very High	5

In the UAE, the al etihad credit bureau (AECB) calculates and shows the credit score of all individuals and companies. The range of credit scores lies between 300 and 900. As home loans involve higher loan amounts and longer repayment tenures, most banks and financial institutions require the applicant to have a medium or high credit score as per the table above. 

Credit scores below 650 are categorised as ‘low’ credit scores. If you have such a credit score, you will find it difficult to find financial institutions offering you a home loan. This is due to the significance of credit scores, which indicate the creditworthiness of an individual. As a low credit score indicates low creditworthiness, the bank or loan provider may be reluctant in offering you the loan.

How Does a Credit Score Affect Loans and Credit Card Purchasing? 

Having a low credit score can lead to multiple hindrances in availing of loans and credit cards. The following points will discuss how can a low credit score can have a negative impact on purchasing a mortgage loan in UAE -

• Rate of Interest: The interest rates charged on your loan amount can vary as per your credit history. If you have a clean record of repaying bills and paying off your monthly loan instalments on time, banks offer you a lower rate of interest. On the contrary, having a low credit history indicates that you have a record of late payments, which increases the risk posed to the bank. Consequently, financial institutions charge a higher rate of interest for individuals with low credit scores.
• Eligibility: When an individual applies for a home loan in UAE, banks assess the candidate's credit profile in terms of credit score, income, and more. Financial institutions also match their eligibility requirements with your credit score. So if your score is low or very low, your home loan application may get rejected immediately. 

How to Buy a House with Low Credit Score? 

As mentioned earlier, it is difficult to get a house with a home loan in UAE if you have a low credit score. However, one can still get a home loan with a low credit score via the following modes: 

• Banks: Financial institutions in the UAE are particular about lending mortgage loans to low credit card holders. In some cases, they might grant you a home loan provided you agree to keep another property as collateral. However, if you are willing to provide adequate collateral and bear high interest rates, you can still get a home loan in UAE with a low credit score. Another step that you can take here is to increase the percentage of the down payment. 
• Private Lending: Individuals always have the option of lending cash from their friends and family without any interest rate. However, if you are in need of a higher amount, you may reach out to an authorised private lender. At the same time, it is necessary to keep in mind that you may be charged higher fees and other charges compared to regular financial institutions for the same. 
• Credit Card: Individuals with a credit card can use it for availing of a mortgage loan in UAE. Several banks in the UAE offer you loans against your credit card. However, it can prove challenging as financial institutions offer a higher rate of interest. 
• Salary Advance: If you are a salaried individual, you can even opt for loans against your monthly salary. Several financial institutions in the UAE grant loans against your income, where the instalment amount can be automatically deducted from your salary. 

How to Boost Your Credit Score? 

Ultimately, while you may still find a few home loan plans with a low credit score, it is highly recommended to improve your credit score and take it to the ‘high’ or ‘very high’ category when considering taking a mortgage loan. This way, you can get home loans from the top providers in the country at lower interest/profit rates.

Here are some tips to enhance your credit score- 

• Timely Bill Payments: The primary step towards improving your credit score is the payment of all the bills on time. Whether it is your credit card bill or utility bill, you must make sure to complete the payment before the due date. This is because the AECB can analyse your bill payment history of up to the previous 5 years. The same can be extended to loans and debts, as the timely repayment of all instalments can also increase your credit score. 
• Limiting Loan and Credit Card Applications: Repeatedly applying for loans or credit cards can negatively impact your credit score. The more your frequency of loan and credit card applications at a particular, the lower your credit score can go. For this reason, it is advisable to not apply for multiple loans or credit cards at a time. Additionally, you should verify the eligibility criteria before applying for the specific financial product to avoid rejection of your application as well as the lowering of your credit score.  
• Not Checking Credit Score Frequently: While keeping a check on your credit score is advisable, doing so in excess can lead to a drastic reduction of your credit score. Consequently, you should only verify your score once in a while and only when the requirement arises. 

FAQ's