Credit scoring: An important step for property buyers

Credit scoring is a key aspect that potential property buyers in Dubai should consider. It is used to assess a buyer’s financial situation before a loan is granted. This check is crucial to ensure that the buyer is able to pay the monthly instalments on time and to minimise the risk for the banks.

Why is a credit check necessary?

Banks and financial institutions want to ensure that the borrower can fulfil the financial requirements. Therefore, a number of factors are considered during the credit scoring process, including:

• Income: The amount of monthly income plays an important role. Higher income often means a better credit score.
• Debts: Existing debts and financial obligations are also taken into consideration. A high level of debt can have a negative impact on creditworthiness.
• Credit history: The bank checks previous credit history to determine whether the applicant has been reliable in the past.
• Equity: A higher proportion of equity can increase the chances of a better loan being granted.

The credit scoring process

A typical credit check follows these steps:

1. Gathering information: the bank requests various economic evidence, such as payslips, tax returns and documents relating to existing debts.
2. Credit check: The bank uses credit bureaus to obtain a credit report and assess financial reliability.
3. Decision: Based on the information gathered and the credit check, the bank makes a decision and informs the applicant.

What happens if the credit check is negative?

A negative credit check can be frustrating for the buyer. In this case, however, there are ways to improve the situation:

• Reviewing one’s financial situation and possibly reducing existing debt.
• Optimising the monthly budget to improve borrowing capabilities.
• Building a better credit history by paying off debts on time.

How to improve your credit score?

To improve credit scores, buyers can consider the following measures:

• Always making payments on time.
• Limiting the use of credit cards within the credit line.
• Regularly reviewing one’s credit report to correct any errors.

Illustrative example on the topic: credit scoring

Imagine Ahmed wants to buy a flat in Dubai. He has a secure income, but also several existing loans. Before applying for a mortgage loan, he decides to have his creditworthiness checked. The check reveals a few small errors in his credit report, which he can quickly rectify. He also begins to systematically reduce his debts. After a few months, he has improved his credit score and receives positive feedback from the bank for his loan.

Conclusion

Credit scoring is a crucial part of the property buying process in Dubai. Buyers should prepare carefully in advance to maximise their options. A good property valuation and understanding your financial position are also essential steps in the process.