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

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

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

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

“Credit reports are a direct reflection of an individual’s appeal and payment behaviour to lenders like banks and financial institutions, but are also as important for other entities such as property managers and telecom service providers,” said Marwan Lutfi, chief executive of AECB.

“The addition of the ESR to the AECB reports is a natural step in our ongoing path towards generating data-driven insight for lenders to assess the creditworthiness of individuals, while taking into consideration their regular non-banking monthly payment obligations, such as utility bills and telecommunication bills.”

Set up in November 2014, the bureau brings transparency to the lending industry by assembling a credit record of the UAE’s financially active residents through harvesting credit data including loan, mortgage, credit card and phone bill payments.

An individual’s credit report documents their entire credit history in the UAE, such as credit cards, loans or other credit facilities they have signed up for, along with their payment behaviour.

Therefore, default on a payment along with any cheques that have bounced in their name will be recorded. The document also lists their identity information, such as full name and Emirates ID.

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

A credit score for individuals is a three-digit number between 300 and 900 that represents a borrower’s creditworthiness and how likely they are to make credit card or loan payments on time. A low score indicates they are a higher risk for a lender while a higher score indicates a lower risk.

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