While the credit bureau is a relatively new concept to the UAE, most residents now know that when they apply for a loan, their credit report is drawn up from the Al Etihad Credit Bureau (AECB) to verify eligibility.

If you want to be rated well for credit worthiness, it’s important to understand basic facts about how the score is calculated. Here are some of the top misconceptions and the truths behind your three-digit credit score.

Credit score calculation myths

#My income affects my credit score

Income is not used to calculate credit score. You may make lots of money, but that doesn’t necessarily translate into good credit. A good score is built by paying your bills on time and prudently managing accounts.

#Loan and card repayments are the only parameters I need to worry about

According to the AECB, your score is calculated using 2,000 different factors. These include nationality, age, number of loans/credit cards and outstanding balances. “Outstanding balances” also includes bills such as mobile phone, internet and such utilities.

#Since I don’t have any credit cards or debt, I have a good score

Not having any credit cards does not ensure a high score. In fact, having and properly managing them helps your rating. Sometimes, when a lender sees that you do not have any credit cards, you may be viewed as a higher risk.

#My spouse’s credit score affects mine

Each person has their own credit score. Hence, your spouse’s rating is material to you only for joint loans. If your spouse has a low credit score, you may find it harder to apply for a loan together. Subsequently, late or missed payments on joint loans affects both of your ratings.

[Related: Worried about your credit report? Here’s how you can improve it]

Myths about checking credit reports

#Only banks use my credit scores

While currently the primary use of your credit score is to help lending institutions review your application for credit facilities, these reports may also be used by telecommunication and utilities companies in the future.

Moreover, in other markets such as the US, UK and India – which have had a credit rating system since a long time now – they are often used by employers when selecting prospective employees. Your score could also be considered by insurers when deciding your premium.

#It’s difficult and expensive to get my credit score

You can simply go to one of the AECB customer centers with your original Emirates ID and passport copy. Get your score plus report for AED 150 (individuals) or AED 220 (corporates). Only score costs AED 60 and only report costs AED 100 (individuals) or AED 180 (corporates).

#I don’t need to check my own credit report

Check your credit report at least once a year even if you make bill payments on time. There could be errors, which you can get rectified. Reading your own report also helps you see how your lender will view you when you apply for a loan.

Find out more about how to dispute data in your credit report.

Credit history myths

#Paying off negative debt removes it from my credit history

Your credit report reflects your entire credit history, including positive and negative accounts. This means that even previously missed installments that were rectified within 90 days, will remain on your credit report for some time.

#My poor credit history has doomed my rating forever

While missing a few bills or few late payments are not great for your report, you can work towards wiping the slate clean gradually. Negative credit records will stay on your report for a period of five years. If you start repaying all your debts now and managing your accounts prudently, your rating is not doomed forever.

#A low credit rating means I will never get a loan

Lending institutions will never read a credit report in isolation. Credit assessment is conducted on a case-by-case basis. The final decision depends on a bank’s appetite for risk.

[Related: The National: Bad debts stay on your UAE credit report for five years]