Credit Card Eligibility in the UAE

Credit Card Eligibility in the UAE: Understanding the Requirements and How to Qualify

The UAE’s vibrant financial sector offers a wide range of credit card options catering to diverse income brackets, spending habits, and financial needs. Understanding the eligibility criteria is essential for anyone applying for a credit card. This article provides a comprehensive overview of credit card eligibility in the UAE, outlining common requirements, factors that influence approval, and tips for navigating the application process.

Basic Eligibility Criteria

To qualify for a credit card in the UAE, applicants must meet several basic requirements set by banks and financial institutions:

Minimum Age: Most banks require applicants to be at least 21 years old, though this age limit can vary

Residency: Applicants generally need to be UAE residents, which is often verified through a valid residency visa.

Minimum Salary: The minimum salary requirement is crucial and varies widely depending on the card. It can range from AED 5,000 to over AED 20,000 per month for premium cards.

Employment: A steady job and a regular income are typically required. Some banks may ask for proof of employment or require a salary transfer to the bank.

Some financial institutions request a security check based on the above profiles.

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Credit History and Score

In the UAE, credit scores play a pivotal role in financial transactions, especially when applying for credit cards. Here’s an in-depth look at how the credit scoring system works in the UAE and what scores are considered acceptable for obtaining a credit card.

Understanding Credit Scores in the UAE

The UAE’s credit scoring system is managed by the Al Etihad Credit Bureau (AECB). The AECB collects financial information from various sources, including banks, finance companies, and telecom companies, to create credit reports and scores for individuals and companies.

How Credit Scores Are Calculated

The credit score is a numerical representation of an individual’s creditworthiness, ranging from 300 to 900. It is calculated based on several factors, including:

Payment History: Timely payments on loans and credit cards improve your score, whereas late payments, defaults, and foreclosures negatively impact the score.

Credit Utilization: This refers to the amount of credit you are using compared to your credit limits. Lower utilization rates generally lead to higher scores.

Length of Credit History: A longer credit history provides more data and can lead to a higher score, assuming the history shows responsible credit use. The term that is used for customers with less than 12 months is a “Thin file” which is considered higher risk than those who have a history of more than 12 months. There can be specific policies applied by the bank for a lower number of months such as additional verifications, higher income requirements, additional documentation, employer profiles, and so on.

Types of Credit: Having a mix of credit types, such as credit cards, personal loans, and mortgages, can positively affect your score.

New Credit: Frequent applications for new credit can lower your score, as it might indicate financial distress.

Acceptable Credit Scores for Credit Cards

Scores 300 – 619: Considered low. Applicants might find it difficult to get approved for credit cards and may only qualify for secured credit cards or products designed for low credit scores.

Scores 620 – 657: Fair. Individuals with scores in this range are typically considered subprime borrowers and might face higher interest rates or less favorable terms.

Scores 657 – 750: Good. This is generally considered low risk to the banks as applicants with scores in this range are likely to be approved for most credit cards.

Scores above 750: Excellent. These scores qualify for the best available credit cards, including those with premium benefits, low-interest rates, and high credit limits.

Tips to Improve or Maintain a Good Credit Score in the UAE

Make Payments on Time: This is by far the most important factor as payment behavior impacts your credit score directly. Always pay your bills and credit card dues on time. Setting up automated payments can help avoid missed deadlines.

Manage Credit Utilization: Try to keep your credit utilization below 30% of your total available credit. It is not necessary that one needs to max out on the credit available. Keep your utilization to your needs and ensure timely payments.

Regularly Monitor Your Credit Report: You may have a card that is accumulating charges since you forgot to close it. Hence, do check your credit report periodically for any inaccuracies or fraudulent activities. This can be done through the AECB’s website, and you can raise it to the concerned banks and have these issues fixed.

Limit New Credit Applications: Only apply for new credit, when necessary, as multiple credit inquiries can lower your score.

Maintain a Healthy Mix of Credit: Diversifying the types of credit can positively impact your score.

By understanding and managing these factors, individuals in the UAE can improve their credit scores, enhancing their eligibility for credit cards and other financial products.

Debt-Burden Ratio (DBR)

The DBR is another critical factor considered by banks. It measures the proportion of a person’s income that goes towards repaying debts, including loans and credit card payments:

DBR Limit: In the UAE, the maximum DBR allowed is 50% of your monthly income. This means that all your monthly debt repayments combined should not exceed half of your monthly earnings.

Additional Factors

Banking Relationship: Existing relationships with a bank can facilitate easier approval, especially if you have a history of responsible financial behavior with that institution. Banks do have more comfort lending to customers who have their salaries credited to their banks.

Type of Employment and Employer: Working for a well-recognized company or a government entity can improve your chances of approval as it implies job security and a stable income. Most companies have a process of identifying specific employers and listing them to offer credit to their employees. These listed companies are supposed to be low in risk considering the employment stability they offer to their employees. Having said that companies can move in and out of the listed zone based on the way their employees perform. The advantage of such listed companies is that the requirements for credit issuance are generally more lenient than those that are not listed.

Self Employed Eligibility

In UAE, eligibility even extends to self-employed persons to applying for credit cards, only eligibility criteria and documentation requirements are minutely different from the ones employed by the company. Banks usually require the individual to furnish bank statements and a profit and loss statement that can confirm consistent income from business along with sound financials. Further, for most cases of self-employment, a trade license or any other document indicating that the business would be run is submitted. For self-employed applicants, the issuer may need to scrutinize with more careful consideration the consistency and reliability of the income to avoid the risks that fluctuating incomes may pose. Self-employed individuals who would like to enhance their chances of getting their credit card application approved in the UAE need to have a good credit score and a low Debt Burden Ratio (DBR). Generally, a healthy cash flow, years in business, and line of business are considered key parameters while underwriting self-employed individuals.

Tips for Successful Credit Card Application

Check Your Credit Score: Before applying, check your credit score with the AECB. Address any discrepancies or outstanding debts. It is recommended that one keeps a tab on their credit score periodically. A credit report can be requested from Al Etihad Credit Bureau for a charge.

Understand the Card Benefits: Match the credit card features with your financial behavior and needs. For instance, if you travel frequently, consider cards that offer travel benefits.

Prepare Documentation: Have all necessary valid documents handy, such as your passport, visa, Emirates ID, salary certificate, and bank statements.

Consider Multiple Options: Don’t apply for multiple cards at once, as this can negatively impact your credit score. Instead, choose the best option that fits your needs and apply for that one first. Make use of the comparison sites to understand more about the products as these sites provide information on most of the banks.

Follow-up: After applying, keep in touch with the bank to check your application status and provide additional information if required.

Find out more details on the cards offered by the below banks by clicking the respective section.