UAE residents in the dark about credit history

The results of a survey showed that 37 per cent of respondents in the UAE today are aware of what a credit report is.

Dubai — Several residents in the UAE remain unconvinced on the need to obtain and study their credit report, and how it can help them in financial planning, a recent Souqalmal.com survey has shown.

Souqalmal.com, the region’s leading financial comparison website, did a survey of 550 respondents to find out how well the Al Etihad Credit Bureau, its role and value for consumers, is already known by the broader audience. The results of the survey showed that 37 per cent of respondents in the UAE today are aware of what a credit report is; and this awareness level increases materially as we look at more affluent consumers — typically Western expats — who are used to having a credit bureau in their home country. For respondents with monthly salaries above Dh35,000, the level of understanding of the Credit Bureau was above 60 per cent.

The announcement that the UAE would have its own credit bureau received an overall warm welcome, and was broadly seen as an important step in the development of the country’s financial ecosystem. After an intensive preparation period, the Al Etihad Credit Bureau went live in November 2014 and is now fully operational.

A credit bureau makes the lending market safer, more transparent and more liquid by giving banks and other providers of credit, such as retailers, an accurate view of a consumer’s risk profile and credit situation, and by protecting consumers from overburdening themselves with debt.

“Your credit history is something that impacts your future ability to get finances for you or for your family. Many people do not realise that their current behaviour in payments or the number of loans they already have does get recorded and is accessible by banks,” Ambareen Musa, founder and CEO of Souqalmal.com, told Khaleej Times.

“Our survey highlights the gap in consumer appreciation and understanding here in the UAE of the importance of their credit report and the value it can bring; and therefore the need for education. The majority of residents either do not know what the credit report is and of those that do, they do not appreciate that it can have a real impact on their everyday lives and financial options,” she revealed.

The fact that more than 60 per cent of respondents are not yet aware of the Credit Bureau today highlights the importance for the Al Etihad Credit Bureau to continue its efforts over the past three months in marketing its services over the course of 2015, and show the importance of the credit report to residents. In addition, 60 per cent of those surveyed claim that they would not buy their credit report simply due to lack of interest.

Out of those who know what the report is about, less than 50 per cent of respondents state that they are confident that they fully understand the factors that influence their credit history, such as missing loan repayments, unused credit cards or bounced cheques.

The credit report in many nations around the world is vital to the individual consumer as it acts as an indicator of the likelihood of being approved for credit. In the UAE, results of this survey show that the report has not yet become an integral part of the consumers’ thought process as they plan their finances.

“Let’s imagine someone wants to take out a loan for their child to study abroad. Now that banks can access the historical data, there is a chance that the loan does not get approved or the bank ends up pricing the loan at a higher rate based on that person’s credit history. It is the responsibility of the consumer to maintain a clean credit report as this can affect their future and that of their kids. At the same time, people who might have found it hard before to get credit, for example because they work for a small company that is not listed with banks, will now find it easier to prove that they are actually credit-worthy,” Musa explained.

Acting upon the findings of its survey, Souqalmal.com has launched a comprehensive online guide on its website to help consumers understand what the Credit Bureau actually does, how they can access and interpret their report, and how to appeal its findings.

— rohma@khaleejtimes.com