You can now access your credit score in the UAE after the Al Etihad Credit Bureau (AECB) launched the system in the Emirates today. But what does it mean? And why would you want to? Here we guide you through the process:
What is a credit score?
A credit score is a number which represents your credit worthiness – in other words, your risk of defaulting on your credit card repayments and loans. In the UAE, the number is between 300 and 900. The higher it is, the better.
How does it affect me?
In many ways. Credit scores are used first and foremost by banks assessing credit applications. But experts, including the AECB, stress that the number is not read in isolation. In fact, Marwan Ahmad Lutfi, the chief executive of AECB, said a high score or a low score does not mean anything. The final decision depends on a bank’s appetite for risk. Some are cautious and prefer borrowers with a clean record, while others are inclined to extend credit to people who have a patchier payment history. In more mature markets, a good credit score has typically led to borrowers receiving lower interest rates. The Al Etihad Credit Bureau hopes the same thing will happen here. Overseas, employers often also use them to assess applications, as a good borrower is often believed to make a good employee. And credit scores are used by other companies, such as insurers, and telecommunication and utilities companies, too. In more mature markets, where credit bureaus have evolved over time, health insurance premiums tend to rise when people miss payments, as they are presumed to be under more stress.
How do I know if my score is low or high?
By checking it. You can do this by visiting Al Etihad Credit Bureau’s customer service centres and providing your valid Emirates ID, passport copy and valid email address.
Why is it important?
Because banks, companies and even future employers will use it to judge you.
Will it stop me borrowing?
It might, but it will not be the only factor banks use to assess credit applications.
What does it mean if my score is high?
Lucky you. It means you have a good credit history and should have no problems getting a loan or credit card, if you want one. It’s only a problem if it is low. Then you have work to do to improve it. The worst score you can have is 300. The best is 900. Many other credit bureaus and companies internationally use the same range.
How much does it cost to find out what my score is?
A standard credit report for individuals or establishments costs Dh100, while the document with a score is an additional Dh50. A credit score only, with no report, for an individual costs Dh60. Standard reports for corporates cost Dh180, or with a score for Dh220.
How is the score calculated?
According to the AECB, the score is calculated using 2,000 different factors including nationality, age, outstanding balances and the number of loans.
What can I do to improve my score?
Pay your bills on time, but loan instalments or credit card repayments are not the only payments you have to keep in mind. Your score is calculated using information collated from various sources such as banks, finance and telecoms companies, so you should make sure you settle all your debts by the due date.
How does it compare to other credit scoring systems around the world?
It is similar, as the score range of between 300 and 900, like many other credit companies internationally, but it is likely that the algorithm that is used to calculate the score has been tailored to the UAE as the demographics are different to some markets like the United Kingdom or United States.
Where can I find out more information about the credit scoring system?
The Credit Bureau has a section on its website dedicated to the new system so log onto: www.aecb.gov.ae
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
How The Debt Panel's advice helped readers in 2019
December 11: 'My husband died, so what happens to the Dh240,000 he owes in the UAE?'
JL, a housewife from India, wrote to us about her husband, who died earlier this month. He left behind an outstanding loan of Dh240,000 and she was hoping to pay it off with an insurance policy he had taken out. She also wanted to recover some of her husband’s end-of-service liabilities to help support her and her son.
“I have no words to thank you for helping me out,” she wrote to The Debt Panel after receiving the panellists' comments. “The advice has given me an idea of the present status of the loan and how to take it up further. I will draft a letter and send it to the email ID on the bank’s website along with the death certificate. I hope and pray to find a way out of this.”
November 26: ‘I owe Dh100,000 because my employer has not paid me for a year’
SL, a financial services employee from India, left the UAE in June after quitting his job because his employer had not paid him since November 2018. He owes Dh103,800 on four debts and was told by the panellists he may be able to use the insolvency law to solve his issue.
SL thanked the panellists for their efforts. "Indeed, I have some clarity on the consequence of the case and the next steps to take regarding my situation," he says. "Hopefully, I will be able to provide a positive testimony soon."
October 15: 'I lost my job and left the UAE owing Dh71,000. Can I return?'
MS, an energy sector employee from South Africa, left the UAE in August after losing his Dh12,000 job. He was struggling to meet the repayments while securing a new position in the UAE and feared he would be detained if he returned. He has now secured a new job and will return to the Emirates this month.
“The insolvency law is indeed a relief to hear,” he says. "I will not apply for insolvency at this stage. I have been able to pay something towards my loan and credit card. As it stands, I only have a one-month deficit, which I will be able to recover by the end of December."
