Al Etihad Credit Bureau will finally begin operations and send out consumer credit reports from September, it has announced.

The UAE’s federal credit bureau is centrally gathering credit data so that banks can see consumers’ data at other banks when making lending decisions.

It will mean that each consumer in the Emirates will end up with a single credit score (also known as a credit rating) from all their activities at all banks – their credit history.

Credit reputation

This will allow a bank to determine their individual credit reputation and decide if they will lend to you at all or what rate they offer you based on their assessment of your risk.

This is in operation in many countries in the world already, such as the US or UK. If you apply for any credit, your application goes to the credit bureau and you are matched by your name, address and other identifying factors to your credit history, which is then sent back to the financial institution you have requested new credit from.

[Related: How can I improve my credit score?]

Until now, people have been able to run up multiple debts at different financial institutions – even though the UAE Central Bank recommends no more than 50 percent debt – with each bank assessing a fresh loan application left in the dark that the consumer has debts at another bank.

Banks have had to rely on listings of reliable employer companies to determine their employees’ creditworthiness, as well as bank and credit card statements, utility bills, credit card statements and copies of your passport, Emirates ID and residency visa.

What will be collected by the Credit Bureau?

  • Eventually, 24 months’ worth of data from banks, phone companies and various government bodies
  • So far, six months’ worth have been collected
  • Five years of data for any credit defaults or bounced checks.
  • Individuals’ Emirates ID details
  • There will NOT be information on credit cards, loans or mortgages you hold overseas

Why is the Credit Bureau important?

  • Your financial affairs will be laid bare for the banks to see. You can no longer hide what liabilities you have in your name – because banks can instantly check if you are telling the truth.
  • The credit bureau will be a boon for employees of non-listed companies, who have traditionally struggled to find a bank comfortable lending when they neither know their company’s reputation nor have had access to the individual credit rating of that consumer. [Search for banks that lend to non-listed companies]
  • Those with a good financial track record, who have kept their debt burden to a minimum and have always made payments on time, could be offered more attractive profit rates on personal loans, mortgages and car loans.
  • Banks will be able to assess whether or not you are a good customer based on factors such as whether you pay on time, whether you have missed any repayments or bounced any checks and whether you pay off the full balance of your credit card or the minimum balance.
  • It will mean that if you have bounced just one check, the bureau and therefore bank will know this and is likely to be more lenient towards you.

Marwan Ahmad Lutfi, CEO of Al Etihad Credit Bureau, said: “The first phase, which will be launched in September, will allow banks and financial institutions to access and purchase existing and potential customers’ credit reports electronically after submitting all the necessary documents. Customers will also have access to their credit reports through our soon-to-be-launched customer service centers.

“The issuance of credit reports to banks and financial institutions is an important step in reducing credit losses resulting from non-performing loans and will in turn help individuals and companies to have a deeper understanding of their financial obligations and debt levels.”

A total of 5.2 million credit facilities of individuals residing in the UAE have been added to the Bureau’s credit reporting system.

A federal law was originally passed in 2010 to set up the bureau. It was subsequently announced last year and was originally expected to launch in June of this year.