
Top 5 Factors That Impact Your Credit Score in Saudi Arabia
Your credit score is a critical measure of your financial health, influencing your ability to secure loans, finance a car, or even rent a home in Saudi Arabia.
Top 5 Factors That Impact Your Credit Score in Saudi Arabia
Your credit score is a critical measure of your financial health, influencing your ability to secure loans, finance a car, or even rent a home in Saudi Arabia. Managed by the Saudi Credit Bureau (SIMAH), this score reflects how responsibly you handle credit. Understanding the key factors that impact it can help you improve your standing and unlock better financial opportunities. Here are the top five factors that shape your credit score in Saudi Arabia, along with tips to optimize each one.
1. Payment History
Why It Matters: Your track record of paying bills and loans on time is the most significant factor in your SIMAH credit score. Late payments, missed installments, or defaults signal risk to lenders, lowering your score.
Saudi Context: In Saudi Arabia, this includes not just loans and credit cards but also utility bills (e.g., electricity, water) and telecom payments, which SIMAH increasingly tracks.
How to Improve: Set up automatic payments for recurring bills and prioritize settling dues before due dates. Even one late payment can linger on your report for years, so consistency is key.
2. Credit Utilization Ratio
Why It Matters: This is the percentage of your available credit that you’re using. A high ratio—say, maxing out your credit card—suggests over-reliance on credit, which can hurt your score.
Saudi Context: With credit cards and Shariah-compliant financing options like Murabaha growing in popularity, keeping usage low is crucial. SIMAH views a ratio below 30% as ideal.
How to Improve: Pay down balances early in the billing cycle, avoid using more than a third of your credit limit, or request a higher limit from your bank to lower the ratio without changing spending habits.
3. Length of Credit History
Why It Matters: The longer you’ve managed credit responsibly, the better your score. Lenders trust a proven track record over a short or nonexistent one.
Saudi Context: For expatriates or young Saudis new to credit, this can be a challenge, as SIMAH only tracks accounts opened in the Kingdom. Older accounts carry more weight.
How to Improve: Keep your oldest credit accounts active—don’t close them, even if unused. If you’re starting out, open a small credit line (e.g., a secured card) and maintain it responsibly.
4. Types of Credit
Why It Matters: A mix of credit types—such as installment loans (e.g., car finance) and revolving credit (e.g., credit cards)—shows you can handle diverse financial responsibilities, boosting your score.
Saudi Context: Shariah-compliant products like Ijara (leasing) and traditional loans both count toward this mix, reflecting Saudi Arabia’s dual financial system.
How to Improve: Gradually diversify your credit portfolio. If you only have a credit card, consider a small personal loan or financing agreement, but only if you can manage the payments.
5. New Credit Inquiries
Why It Matters: Applying for multiple credit products in a short time can signal financial distress, lowering your score. Each “hard inquiry” from a lender stays on your SIMAH report for up to two years.
Saudi Context: With Vision 2030 expanding credit access, it’s tempting to apply for new offers, but restraint is essential to protect your score.
How to Improve: Space out credit applications—aim for no more than one every six months. Check your eligibility with banks beforehand to avoid unnecessary inquiries.
Why These Factors Matter in Saudi Arabia
Saudi Arabia’s credit system, overseen by SIMAH, blends global standards with local nuances. Shariah-compliant financing, utility payment tracking, and Vision 2030’s push for financial inclusion make these factors uniquely relevant. A strong payment history and low credit utilization, for instance, align with the Kingdom’s emphasis on financial discipline, while a diverse credit mix reflects its evolving financial landscape.
Take Control of Your Credit Score
Improving your credit score in Saudi Arabia starts with understanding these five factors. Focus on timely payments, keep credit usage low, maintain old accounts, diversify responsibly, and limit new applications. Regularly check your SIMAH report to track progress and address issues. With these steps, you can build a credit score that opens doors to your financial goals.