From 2016-2019, Israel joined countries around the world in beginning to use a robust credit data system. Financial information is collected by the Bank of Israel and used by authorized scoring agencies to assign a credit score to every citizen over 18. This score provides banks, credit card companies, and other lenders with a barometer for measuring the “credit worthiness” of every Israeli citizen. Maintaining a high credit score in Israel is a now a vital part of your financial health and can have a significant impact on the terms of a mortgage, personal loan, and just about any line of credit.

How it works

The Credit Bureau of the Bank of Israel collects and stores data from your financial behavior. This includes detailed information about your financial history, such as the debts you have and whether or not you have paid your bills on time. Some of this data is then analysed by licensed credit rating rating companies (namely BDI and D&B) in order to assign a personal credit score (דירוג אשראי אישי) to every Israeli resident over 18.

Your credit score can be used by various financial institutions to compare customers determine how “safe” it is to lend money to you. Banks, loan providers, credit card providers, and insurance companies are authorized (with your consent) to obtain this information about your credit history (previous 3 years only) in the event you request: a loan, mortgage, new credit card, an increase in your credit allowance (מסגרת אשראי), or wish to change the terms of an existing loan or mortgage. The higher your credit rating, the better the terms or easier the approval will be in these situations.

Your credit score does not take into account how many assets you have or how high your income is. Rather, it is focused on whether or not you have been paying all your bills and meeting any debt obligation on time.

Main factors

There are generally 5 key factors that impact your credit score based on the following weights:

• Payment history – 35% – Simply put, have you been paying your bills on time? Missing a payment or bouncing a check will have a negative impact on your credit score, while every payment you make on time will have a positive impact. This is the most important factor. Obviously, something more severe such as bankruptcy or foreclosure would dramatically lower your credit score.
• Utilization of credit limits – 30% – The higher the percentage of your available credit that you are already using, the higher the perceived risk in lending more money to you.
• Length of credit history – 15% – Being a newer borrower without an established credit history can negatively impact your credit score.
• Credit mix – 10% – A historical record with a diverse set of loans (credit cards, mortgage, car loan, etc.) can demonstrate your ability to pay back different types of loans and impact your credit score positively. (This is not a good reason to take out an unnecessary loan!)
• New credit – 10% – Opening several new credit accounts (Such as ordering two new credit cards or taking out two different loans) at the same time can negatively impact your credit score.

Credit scores are developed based on complex statistical models. Different factors can affect people’s scores differently and the list above is just a general reference point.

Credit score levels

To illustrate further how credit scores work, let’s look at the credit ranges and what they mean. This table uses D&B’s credit score (the same one used by Captain Credit discussed below).

Range	What it means
0-200	The lowest credit rating – your financial conduct is awful and you are won’t be able to get any loan or line of credit
200-600	Low credit rating – you are unlikely to be eligible for a loan or line of credit
600-800	Below average credit rating – you may not be able to get credit, and if you do it won’t carry good terms.
800-850	Average credit rating that will likely entitle you to average credit terms.
850-900	Above average credit rating which demonstrates good financial conduct. Better terms available.
900-950	Very good credit rating – it is likely that credit providers will compete for your business
950-1000	The best credit rating entitling you to the best terms on the market.

Keep in mind that while having a good credit score is important, it is not the only thing banks will look at before providing you with terms for a loan.

How to monitor your credit

The easiest way to monitor your credit score is by downloading the Captain Credit app. D&B gives you access to your credit score at any time for free through this app. Captain Credit is licensed and regulated by the Bank of Israel to ensure your information stays safe. The app will also give you insights on why your score is what it is and how to improve it. Your credit score will be updated every month, after the 20th of the month.

You can also request a full report on your credit history from the Bank of Israel’s Credit Bureau, here.

If you are married, you and your spouse should both monitor, maintain, and build a strong credit rating. It’s important, for example, that both have their own credit card in their own names.

What if I just made Aliyah?

The bottom line is that new Olim aren’t likely to have much credit history data stored in the Bank of Israel’s database. Building up enough data for a good credit score will take time. This is why new Olim are generally only able to order a non-bank credit card after 6-12 months of using their bank issued cards.

For those with poor credit ratings in another country outside of Israel, the good news is that information won’t affect your credit rating in Israel. Use this fresh start to develop and maintain healthy spending and borrowing habits here in Israel!

How to improve your credit

It is important to note that there is generally no way to significantly improve your credit score overnight. By practicing good financial behavior, over time your credit score will rise. Credit reports and scores incorporate data from the previous 3 years but focus most heavily on the data within 6-12 months prior to date at which the report is requested. Therefore, in a relatively short period of time you can have a significant positive or negative impact on your score.

Simply put, by practicing good financial management, you will improve your personal credit rating. Here are some steps you can take to improve a low credit score:

Double check your credit history

The first step is to order a report from the Bank of Israel and verify that everything is correct. If you believe there is a significant mistake that is negatively impacting your credit score, you can file a request to amend the faulty data, here.

There are also options for electing to exclude some of your information from the BOI database. Choosing to do so you will most likely be viewed as red flag automatically designating you as a high risk customer and treated as such. This is therefore rarely recommended.

Make payments on time

It may sound obvious but one can’t be stressed enough. Even a single late payment on a loan, fine, ticket, penalty, etc. can have strong negative impact on your credit rating. On the contrary, everytime you meet your payments on time you are having a positive effect on your credit rating.

If you know of an upcoming payment that you will have difficulty making, don’t wait for the payment date to arrive or for a check to bounce. Make sure you have enough money in your accounts to cover the bill and if not you should be proactive by trying to arrange a delay in advance with whomever the money is owed.

Keep a percentage of your credit limit free

Exceeding the credit limit of your credit card and/or going in to minus in your bank account puts downward pressure on your credit rating. By keeping a good chunk of your credit limit (ממסגרת האשראי) available and by consistently paying off outstanding debt, you will broadcast that you are in a stable financial situation. By increasing the amount of your credit limit you keep free each month, you can significantly improve your credit score.

Spread out loan and card applications

Avoid applying for multiple loans at the same time. Credit score providers looks at requests for multiple lines of credit within a short time frame as a sign of financial distress. It is often not a good idea to apply for multiple loans or multiple credit cards at the same time. Spread out your requests so that they are not interpreted as a desperate need for cash.

Having a strong credit record can prove very beneficial – whether it just for the basics like applying for a new reward credit card or something more significant like purchasing a home or financing a new business. Maintaining a strong credit rating is a very important part of your financial health!