Al Etihad Credit Bureau introduces expense to salary ratio in credit reports

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Al Etihad Credit Bureau (AECB) credit reports will now include an expense-to-salary ratio (ESR) as it seeks to offer more information on the creditworthiness of individuals in the UAE by assessing their monthly non-bank payment obligations.

The ESR will be stated as a percentage ranging from zero to 100% and will represent the individual’s financial obligations in proportion to their salary, the regulator said in a statement on Friday.

Information for the ESR will be based on active credit facility payments, credit card limit and monthly telecommunications and utility bills, the AECB added.

“Credit reports directly reflect an individual’s attractiveness and payment behavior to lenders such as banks and financial institutions, but are also important to other entities such as property managers and telecommunications service providers,” said Marwan Lutfi, CEO of AECB.

“Adding ESR to AECB reporting is a natural step in our continued journey towards generating data-driven insights for lenders to assess the creditworthiness of individuals, while taking into account their credit obligations. regular non-bank monthly payments, such as utility bills and telecommunication bills.

Established in November 2014, the bureau brings transparency to the lending industry by building a credit history of financially active residents of the UAE through the collection of credit data, including loan payments, mortgages, credit cards and phone bills.

An individual’s credit report documents his entire credit history in the UAE, such as credit cards, loans or other credit facilities he has taken out, as well as his payment behavior. Consequently, the non-payment as well as all NSF checks in their name will be registered. The document also lists their identity information, such as full name and Emirates ID card.

A UAE resident can only have a credit report if they have taken out credit through a credit card, loan, mortgage or phone bill. The AELC collects data from banks, finance companies and telecommunications companies.

A personal credit score is a three-digit number between 300 and 900 that represents a borrower’s creditworthiness and likelihood of making credit card or loan payments on time. A low score indicates they pose a higher risk to a lender, while a higher score indicates lower risk.

The ESR will be an indication of an individual’s total payment obligations against the reported monthly salary, the office said.

Banks provide details of an individual’s salary as part of regular data submissions to the AECB.

The new feature will serve as an “additional parameter in assessing creditworthiness and affordability for individuals and banks”, he added.

“The ESR not only provides banks and credit report users with information about an individual’s spending behavior, but is also a barometer for individuals themselves that will allow them to assess their own spending habits. and – hopefully – to consider a more fiscally responsible alternative should their ESR be less than ideal,” Lutfi said.

Meanwhile, the AECB’s ChequeScore service, which allows businesses and individuals to instantly assess the risk of an NSF cheque, is now live on the office’s website.

ChequeScore, which covers checks issued by licensed banks in the UAE and calculates issuer’s credit score, payment behavior, check issuance and clearance history in real time, was unveiled under application form in February.

“This serves to reduce the number of NSF checks and helps with financial responsibility,” the credit bureau said.

Updated: April 29, 2022, 7:08 a.m.

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