With Al Etihad Credit Bureau finally launching its services earlier this month by beginning to issue consumer credit reports, the financial history of UAE consumers is now more important than ever. Apparently, the credit bureau even collects information from utilities such as DEWA as part of its credit history reporting. This could mean late DEWA payments and other similar offences could affect your ability to get loans in the UAE.
WAM, the state news agency, reported on this by saying “The credit reports will include consumers’ debt obligations and payment behaviour pattern for the past two years. These will no doubt contribute positively to the banking sector, playing an important role in the assessment and management of credit and possible losses resulting from non-performing loans. Individuals will, in turn, be able to have a comprehensive overview of their current financial obligations and debt payment frequency and consistency over the past two years.”
While banks in the UAE will not be forced to use the credit bureau’s services, it is likely banks will no longer turn a blind eye to an applicant’s outstanding debts and will focus more on pricing risk. This means that after analyzing all of the data from these different sources for a given individual, the bureau will assign a credit score to them. Currently, most banks offer standard interest rates for loans and add a few basis points based on different criteria. However, rates are probably going to become more personalized depending on your credit score. This means a home loan rate will be tied to your outstanding debts and your history of timely payments.
For consumers, this means it is even more important to do research beforehand to find the best credit card or loan. Many experts from the industry believe that the establishment of the Al Etihad Credit Bureau will considerably slow down the lending industry in the UAE. However, for those with a good credit history, they may be able to take advantage of lower interest rates.
Credit reporting systems give off the illusion that having debt is bad. However, if you have never had a loan, you will have no credit history; this means banks might be more cautious lending to you since you have not demonstrated that you are a good credit risk. While no one can predict exactly what the Al Etihad Credit Bureau means for consumers, the industry’s development over the next few years should be very eventful.