Credit Score
Credit scores come into play each time an individual in the UAE approaches a bank for loans or other services. And even in other transactions that involve issuing cheques. This is why a sound credit score is vital. Image Credit: Shutterstock

Dubai: UAE residents with poor credit scores brought on by bouncing cheques or delays in payments could soon have a chance to rebuild their ratings back into positive territory. The Al Etihad Credit Bureau is ‘assessing’ a plan to introduce a scheme where individuals are actually rewarded - and not just docked - points.

If the plan is put into effect, individuals with an indifferent credit rating can hope to start afresh on their records – and thus stand a better chance of taking loans or enter transactions that involve submitting cheques.

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“Let’s say an individual gets laid off and misses two or three payments, that should not stick to the credit history for five years or more,” said Marwan Ahmad Lutfi, CEO of AECB. “As you start repaying on all the commitments on time, it takes anywhere between 6-12 months to get back to where you were on the credit rating.

“Credit ratings typically work by penalising someone for non-payments. We want to change that, where for good behaviour, individuals can get a boost to their credit scores. If you fall short on something, there must be something that can offset that.

“I don’t think such a scheme exists anywhere in the world – but the UAE is unique, we want to do things differently.”

Current UAE credit scores and ratings are built on whether an individual (or businesses) has defaulted on cheque and other payments, including utility and phone bills. {Plus, from last December, court decisions handed down that involved financial obligations too were made part of the credit scoring. 

At the end of the day, if you fall short on something related to payments, there must be something that can offset this. That's what we are trying to do with the 'rewards' plan

- Marwan Ahmad Lutfi of Al Etihad Credit Bureau

Credit ratings matter

The Al Etihad Credit Bureau scores an individual’s rating over a 300-900 range, where non-payments or delays translate into lost points – and by extension, the individual’s chances for loans or other services where he has to issue cheques, etc.

The AECB credit ratings on individuals – and businesses – have become integral for the banking sector, where those seeking loans or other services are told ‘immediately’ whether they are eligible or not.

There are 2,000 or so ‘attributes’ that go into making up an individual’s current credit score/rating. If the plan to ‘add’ to the credit score is passed, “We could bring in other attributes into the scoring that would act as offsets – where you win points rather than only being penalised,” said Lutfi.

“We want to have a system where good credit behaviour is actually rewarded.”

In pandemic year, UAE residents were given a break
Through 2020, when COVID-19 disrupted lives and businesses, the Al Etihad Credit Bureau made sure that none of the missed payments or cheque defaults were reflected in the credit scores. “A lot of individuals who had loan restructuring or tenor extensions, it was mentioned in our reports, but not on the credit scores,” said Marwan Ahmad Lutfi of AECB. “But this was purely Covid related."

Timeframe for launch

AECB could introduce the rewards scheme as early as next year. “It will require a lot of analytics and (consumer behaviour) modelling and testing with our partners such as banks,” the CEO added. “Next year, we plan to significantly revamp and improve the credit scoring model.

“Our aim is not to penalise everyone – but to do real good. Let’s be clear, we don’t influence a bank’s decision to lend or not to a particular individual or business.”

’10 years of data’

The UAE credit bureau is sitting on reams of data culled over more than 10 years. “We believe we can create models that are much more predictable in nature,” said Lutfi. “That helps with making informed decisions – it helps individuals, businesses, banks and all other stakeholders.”