I want to take out a personal loan, but I’m concerned my past will come back to haunt me. I’ve heard there is a new credit bureau that records all your financial data, good and bad. Four years ago I missed some repayments on a previous loan, and although the bank and I eventually came to a repayment agreement I’m worried this will affect the approval of a new loan. How can I check this before applying? BN, Dubai
The expert advice
Ambareen Musa, founder of Souqalmal.com
Dear BN, you are absolutely right, your credit history combines records of your existing debts, including credit cards, personal, car and home loans and any missed loan/credit card repayments or bounced cheques will appear as well. All your current credit cards whether used or not will also appear on your credit report. These records (of the past two years) are provided by the banks to the Al Etihad Credit Bureau – the UAE’s official credit bureau. There is a law which says one’s debt repayments cannot be more than 50 per cent of their income and your credit report will show how much of that 50 per cent you have already used up. So what does it mean for you when you miss repayments? In a nutshell, the next time you apply for a loan, your bank will go to the credit bureau to get your credit history details before it makes a decision on your application. The bank will have access to the information that all the other banks have provided, for example the number of credit cards you have and their limit, the number of loans you have and any missed repayments in the past. This will allow the bank to check whether you have reached your debt burden ratio and check your repayment behaviour. Depending on the bank’s credit criteria of who it will lend to, your credit report will help it make a decision on whether to approve your loan and help it fix a rate. Therefore before applying, it is a good idea to find out what is in your own report. This is possible by purchasing a copy from the Al Etihad Credit Bureau. It costs Dh110 and you need your Emirates ID and passport to apply. The report takes 10 to 15 minutes to issue.
As more banks rely on a customers’ credit history to make decisions on loan applications, it will become extremely important to pay special attention to credit history and reports.
The reader’s advice
Mustapha Ali, Abu Dhabi
I had similar concerns to you and applied for my credit report to put my mind at rest. It was a straightforward process and once I had the report in hand I felt relieved. My wife and I are jointly buying a house and I’d accidentally missed a couple of payments on a credit card about five years ago. I thought this would affect our application. But because the credit bureau records only financial transactions over the past two years, it did not show up on the report. This was probably aided by the fact I resolved the issue amicably with the bank and have been a model bank citizen ever since. So my advice: apply for the report to put your mind in rest.
The next Money Clinic
I am getting married and have three credit cards that I want to pay off – ideally by taking out a liabilities loan to reduce my monthly repayments. However, my company was not on any bank’s approved employer list. Then one of the banks I have a credit card with (with an outstanding debt of Dh43,000) offered to register my company and offered me a loan of Dh94,000 to cover all my debt. When the final loan offer came through though, it was only for Dh51,000 and the sales rep told me this was because of my existing credit card debt with that particular bank. This loan amount will not decrease my monthly repayments but increase them so how can I get around this issue? RB, Abu Dhabi
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