April 17, 2017
Al Etihad Credit Bureau (AECB) launched a credit scoring system today which assesses the credit worthiness of individuals within the UAE. The concept which is common in mature markets, may result in better rates for applicants with a strong credit history.
Credit card interest rates in the UAE are much higher than elsewhere, averaging 40% per annum. Double the rate paid in more established markets. Banks claim this is a symptom of the transient nature of the UAE. Unsecured lending such as credit cards carry much greater risk when a defaulting borrower has the option of returning to their home country to avoid their debt obligations.
High local credit card interest rates have factored such risks into their interest and profit rates, much to the detriment of honest, reliable borrowers.
The new credit scoring system by the Al Etihad Credit Bureau will allocate a 3 digit number of each individual. The higher the number, the stronger perceived credit-worthiness of the applicant. It is expected that strong applicants may be able to negotiate better rates on loans such as credits cards, and enhanced benefits on telecommunication and insurance contracts. Which would be a welcome change to the current one size fits all approach.
The score takes into account more than 2,000 individual attributes including age, payment history, nationality, number of loans each with its own weighting.
The Al Etihad Credit Bureau currently lists reports that outline individual’s identity and existing liabilities. Credit scoring is a natural progression and a deliberate step to “adopt international standards in credit reporting” said Marwan Ahmad Lutfi, chief executive of AECB as reported by The National. View full article here.
Whether or not credit scores will enable strong applicants to negotiate better home loan interest rates and terms are yet to be confirmed but certainly this will be taken into consideration when assessing applicants.