Credit reports provide banks with a complete overview of your credit history – your total loans outstanding at a given point of time, whether you’ve made all your repayments on time, details of defaults if any as well as information about your previous loan applications. Based on your overall credit score, banks will decide if they want to lend to you or not. Even if your loan is approved, your credit score may affect the rate you’re offered, depending on ‘how risky’ a borrower the bank thinks you are.

An impaired credit report can cost you financially in the long run. So how can you improve your credit history and get in the good books of banks? Here are a few steps you could follow, as well as damage control tips to help you repair your credit report:

No overdue balance, check again

Cancelling a credit card is more than just cutting it in two. If you’ve destroyed an old credit card thinking that there’s no outstanding balance, it could come back to haunt you later.

When cancelling a credit card, make sure that you talk to the provider about closing the card account. Once the bank has verified that there are no outstanding dues on the card, follow the stipulated procedure to close it. Also ask the bank to provide you with a document/proof mentioning that the card is closed.

Keep a tab on your credit card utilization

Credit card utilization is simply the ratio of the total card balance to the overall credit limit on all your credit cards. A high utilization on your credit card could also negatively impact your credit report. Personal finance experts say that it’s a good idea to keep your credit card utilization under 40 percent. When you’re utilizing a high percentage of your credit limit, it can be seen as a red flag by banks that you’re experiencing financial difficulty and thus you can be perceived as a risky borrower.

Close debts that you don’t need

Many of us are guilty of getting a new credit card which sounds tempting with the offers available with it. And thus accumulate credit cards, most of which we don’t even use.

If you own a credit card or overdraft that you’re not using, it would be a smart move to cancel and close it. An unused credit card or overdraft would also count as debt because of the credit limit available on it. Even if you don’t need a loan today, you could need it in the future and it would be useful to get rid of all unnecessary debt so it doesn’t affect your loan eligibility tomorrow.

What if you don’t agree with your credit report data?

The Al Etihad Credit Bureau also has a system in place, through which you can dispute data shown on your credit report. If you see an error on your report, you can register a dispute and provide the relevant documents to support your case like account/card/loan statements from the bank. The bureau will verify this information with the bank and provide you with a resolution within 20 working days. If your claim is verified, the disputed information will be amended in their database.

[Related: UAE credit reports explained]

Check your debt burden ratio before applying for a loan

As per UAE Central Bank regulations, your debt burden ratio cannot exceed 50 percent. So if you’ve reached this threshold, you are unlikely to get a new loan from banks in the UAE. You can use the Debt Burden Calculator to find out how much total debt you current owe, which will give you an idea about how much more you are eligible to apply for.