UAE: New UAE credit scoring system launched by Al Etihad Credit Bureau

By Ella Tautz-Davis; RFi Group

The Al Etihad Credit Bureau (AECB) has launched a credit scoring system for UAE residents that will allow it to gauge the likelihood of loan default within 12 months.

The score is calculated using a propriety algorithm owned by the bureau. The algorithm considers over 2000 attributes such as age, outstanding balances and number of loans. Each borrower is then assigned a three-digit number (between 300 and 900) which determines the future risk of default – the lower the score, the higher the risk.

This improved credit scoring is being introduced in the hopes of providing better rates to borrowers with good payment histories and to bring the UAE in line with other market. “The launch of the Credit Score is in line with AECB’s ongoing commitment to adopt the highest international standards in credit reporting and enhancing the UAE financial infrastructure,” the CEO of AECB, Marwan Ahmad Lutfi, explained. Individuals or corporates in the UAE that obtain high credit scores could gain more negotiating power when borrowing, lower premium for insurance, get better payment terms with landlords and enhanced benefits with telecom and utility firms.  Although AECB has been issuing credit reports since 2014, there is hope that this new system could signal the end of blanket high credit card rates in UAE.

This development is likely to be very valuable to UAE consumers, with RFi Group UAE Priority & Retail Banking Council data showing that demand for credit is high, with over 80% holding a borrowing product such as a credit card or personal loan.

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