Low Credit Scores: What They Really Cost

**Tim Elliott** (0:01)
It's the Morning Drive. A credit score is not just a bank number. There is a statement. It is now a critical part of your professional and personal reputation in the UAE. So what do you need to know about your score? James Thomas is a UAE licensed independent financial advisor, consultant. I'm not sure what to call you, consultant or advisor. What would you call yourself?

**James Thomas** (0:29)
That's a great question. Yeah, I know.

**Tim Elliott** (0:31)
What do you say when people say... Do you use both? Because I normally would say consultant, then I thought, well, you're licensed to give advice.

**James Thomas** (0:37)
I know that. Exactly.

**Tim Elliott** (0:38)
But consultancy, talking about stuff.

**James Thomas** (0:41)
Yeah, that's a question to throw me off.

**Tim Elliott** (0:44)
Guy knows what he does. Exactly. I don't know.

**James Thomas** (0:47)
Exactly.

**Tim Elliott** (0:48)
That's an aside, nothing to do with anything. So look, let's talk about credit scores. This is interesting. It's been in the news this week as well.

**James Thomas** (0:53)
Indeed, it has. That's why I thought it was quite a topical subject.

**Tim Elliott** (0:55)
Yeah, for property, of course. So landlords now have access to getting that kind of information to decide whether or not they want to move ahead with your rent contract. It has a bearing on it, at least. So for most of us, credit scores kind of only matters when you want a credit card or a loan, really. You want to get yourself a product. It's more the loan thing, isn't it, really?

**James Thomas** (1:18)
Yes, well, it has been.

**Tim Elliott** (1:19)
Yeah. It's now more like a, almost like a financial CV or a resume. It sort of follows you everywhere, from your next sort of rental contract, your job application, maybe your insurance premiums. Is that the way we should be looking at it?

**James Thomas** (1:33)
I think it is, yes, as you rightly say. In the past, it's always been quite an abstract thing that we only ever really worried about when we wanted a loan or a mortgage or whatever it may be. Whereas now, it's becoming far more involved in all aspects of our financial situation, and therefore becoming more important, even if we don't realize. Because again, it's a number that's generated somewhere by someone or something that we think we have no or little influence over. And in fact, again, that's not necessarily the case.

**Tim Elliott** (2:08)
Well, no, it's not, is it? We'll kind of drill into that a little bit. I mean, a lot of us, I suppose, are a bit surprised when they learn that the credit bureau, it's the LSA had credit bureau, they don't just track bank loans. So I guess things like phone bills, utility payments, they're a part of that resume as well. So if you're paying things back on time, you know, paying things regularly, that's part of the process, isn't it?

**James Thomas** (2:32)
The key word they use is paying back. Because of course, these things, even though we don't view them as such, if we're on a post-paid mobile phone contract, they are effectively giving us that month than we pay in arrears.

**Tim Elliott** (2:48)
It's a credit arrangement, isn't it?

**James Thomas** (2:49)
It's a credit arrangement. Likewise, with our utility bill, we generally pay monthly in arrears. So again, there's an element of credit. They have provided that water, electricity and taken away our wastewater in advance of us paying them.
So we may not come across as a loan or a credit or an interest facility. It is viewed as such. And therefore, the Credit Bureau are now using that as an additional information about our ability or history to repay things.

**Tim Elliott** (3:34)
Well, and they have that historical data. I mean, in some cases, it tracks back a number of years, doesn't it? So it gives a pretty good indicator of, you know, what you like with your money, what you like with your debt.

**James Thomas** (3:45)
It does, whether we thought it did or not. But yes, that and that's obviously why they're now incorporating that, because while we may view our loans, credit cards, mortgages as the only debt that we have, and therefore pay more attention to repaying those, if we're a little less or a little more lax with other areas of our finances, they are now being incorporated into this credit score.

**Tim Elliott** (4:14)
Yeah, that's right. I mean, we've heard a little bit about this. I kind of pointed to this at the top, that landlords, property management companies are starting to check credit reports before the lease gets signed kind of thing. That's been in the news this week. So for a tenant with a fair or maybe not such a fair score, what are the real world consequences? Are you maybe looking at, I don't know, higher deposits or maybe even rejections?