How Israelis Are Dealing with Bad Credit Problems

The Israeli financial market has long been the backbone of the country and represents one of the leading financial sectors in the world. The marketplace is highly regulated and boasts specialist lending options rarely available elsewhere.

For the Israeli population having such a robust financial system is beneficial, offering the opportunity to buy and own land, grow businesses, and finance projects. Those with bad credit scores however often find themselves shunned and shut out from the market, making it difficult to escape the bad credit trap.

We explore how bad credit affects Israelis and how new prospects are on the horizon.

What is Bad Credit

When you borrow money in Israel there are numerous obstacles. Especially if you have a bad credit history.

Finance works differently in Israel compared to other countries around the world. Mostly this is a result of strict religious lending practices.

These lending practices dictate how lenders can make profit from loans and the responsibilities of the borrower in discharging that debt.

In most countries, bad credit would simply mean you are charged a higher interest rate to reflect the additional risk you present to a lender – however, many Israeli lenders do not charge interest.

This means a large portion of bad credit borrowers are barred from the borrowing market altogether.

Types of Finance Available for Bad Credit Scores

Depending on your faith, your bad credit problem may not prohibit you from borrowing further. For example, many Jewish lenders are allowed to extend borrowing to gentiles and charge interest on the loan.

This means there are bad credit loans available to gentile Israelis.

For Jewish Israelis with bad credit, there is a stigma about the previous debt problems, and they will often find they have to go a long way to make amends for their poor money management.

The Israeli government has realised there is a growing number of people experiencing financial problems in society and have taken steps to address the issue. There are now specialist loans available to Jews with bad credit history to rebuild their credit and social standing.

There is also a growing trend in Israel of non-Jewish lenders establishing banks and lending houses that charge traditional interest payments. This allows the potential for Jewish borrowers to borrow money providing they find it is religiously acceptable to make interest payments.


These types of loans are low-cost borrowing aimed at helping those with bad credit to rebuild their credit profile. Typically, they will be low value loans with small repayment costs.

Microloans are normally provided by social enterprise companies or charities that are concerned about those on the fringes of economic society.

For example, microloan companies work with unbanked populations or women who may find it difficult to secure finance. This extends to minority groups who are shut out from financial opportunities due to cultural or religious differences.

How to Improve Your Credit Score

In Israel there are a few things you can do to improve your social standing and repair a bad credit score:

  • Responsible money management and ensuring all debt repayments are made,
  • Settling old debts,
  • Utilising modern banking apps,
  • Microloans where applicable.

The rules around bad debt are complex in Judaism which can make improving your bad credit history difficult. Support networks are strong though and you should be able to improve your economic standing by engaging with local community leaders.

Historically, Jewish communities prefer to keep money matters within the community, however this is changing as Israel becomes a financially dynamic society. In modern Israeli society, there is a growing movement of financial openness and tolerance.

In 2019, Israel launched its first consumer credit database, signalling an end to community focused borrowing and a more updated approach to credit scoring.

Bad Credit Financial Institutions

There are two types of financing available to Israelis:

Both private and state lenders have been working to bridge the gap between those with good credit scores and those with adverse credit histories.

State provided finance covers a range of specialist reasons for borrowing. For example, in Israel you can borrow money from the state to get married, extend your family or buy land.

Private financial institutions cover a whole range of loans such as mortgages, vehicle finance and credit cards.

Overall, with both state and private lending considered, Israelis have access to extensive borrowing that often goes above and beyond other market leading countries.

Regulation of Bad Credit Lending

Regulation of financial services in Israel is strict and most of the regulation in place is based on religious teachings.

Some of the more recent legislation has aimed to open the financial market to more diverse products and services. The regulation in Israel today is a hybrid system encompassing both faith-based lending practices and traditional financial rules.

With the implementation of the Consumer Credit Database, Israelis now have access to credit profiles that allow them to build credit scores and access more borrowing when required.

This is quite removed from the way bad credit borrowers were treated before in Israeli society and is providing hope to those who have suffered because of historic poor choices.

Bad Credit Comparison Websites

Israel is taking strides toward a more open and universally accessible banking system. There is still plenty of progress to make and stigmas about bad credit persist.

In time though, as more financial institutions recognise how important Israel is to the global economic community, this will change. In the UK, this change has taken many decades and it is only recently the first Bad Credit comparison website was set up,

This Bad Credit comparison website allows bad credit borrowers to compare different products and select the best interest rates and borrowing for their situation.

Israel is moving at an expedited pace and will soon reach this level of financial openness, and it would not be a surprise to see Bad Credit comparison websites within the next decade to help Israelis borrow money more easily.

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