The Finance World Magazine| Edition: April 2023

UAE Banking
UAE residents get a chance to improve
their credit score
The Al Etihad Credit Bureau
is considering a proposal to
implement a program that
offers a chance for UAE
residents with low credit scores caused
by bounced cheques or payment delays
to improve their ratings. The plan aims
to reward individuals with positive
points rather than solely penalizing
them. If the program is approved, people
with average credit scores will have an
opportunity to reset their credit history,
increasing their chances of securing
loans or engaging in transactions that
require cheque submission.
According to Marwan Ahmad Lutfi,
CEO of AECB, missing a few payments
due to job loss should not negatively
impact an individual’s credit history
for five or more years. He proposes a
new system that rewards individuals
for positive behaviour instead of solely
penalizing them for non-payments.
The current credit rating system takes
6-12 months of consistent payments
to recover from non-payments, but
Lutfi wants to implement a scheme
that offsets any shortcomings with
positive actions. He suggests that this
10 www.thefinanceworld.com April 2023
system would be unique to the UAE
and not currently in place anywhere
else in the world.
In the UAE, credit scores are based
on a person’s history of defaulting on
payments, including checks, utility
and phone bills, and court judgments
involving financial obligations. The Al
Etihad Credit Bureau scores people
on a scale of 300-900, and delayed or
missed payments result in lost points,
affecting their chances of obtaining
loans or other services. These credit
ratings have become crucial for the
banking industry, as they immediately
determine the eligibility of applicants.
If the proposed plan is approved, the
AECB could include positive attributes
that offset negative ones, allowing
individuals to earn points for good
credit behaviour. This system would
differ from the current one, which only
punishes those with poor credit scores.
A reward scheme for good credit
behaviour may be introduced by AECB
as early as next year. To implement this
scheme, the credit bureau will require
extensive analysis, consumer behaviour
modelling, and testing with banking
The system would
be ground-breaking,
exclusively
implemented in
the UAE, and not
replicated anywhere
else globally, offering
a distinctive approach
to the country’s
operations.
partners. The aim of this change is to
improve the credit scoring model and
reward good credit behaviour, rather
than solely penalizing individuals.
However, the bureau clarified that
they do not have any influence over
a bank’s decision to lend money to an
individual or business.