Bad debts stay on your UAE credit report for five years

A two-year financial history of banks' customers was initially requested by the Al Etihad Credit Bureau when it launched in 2014.

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Missed debt payments stay on your UAE credit report for five years, according to the Al Etihad Credit Bureau.

The bureau confirmed the five-year cut off point after The National asked whether UAE banks are aware of previous defaults once a specific time per­iod has elapsed.

“Credit reports include default information only for the last five years,” the bureau said.

Initially the bureau requested a two-year financial history of banks’ customers when it launched in late 2014. At the time the organisation said that the credit reports would include “consumers’ debt obligations and payment behaviour patterns for the past 24 months”.

Ambareen Musa, the founder and chief executive of the comparison website and a member of The National's debt panel, said the new time scale means credit offences will continue to cast a shadow on an individual's credibility as a borrower during the five-year period.

Rules regarding how long bad credit information stays on your report vary around the world.

In the US, a bad credit history including late payments, debt default or even a bankruptcy, stays on an individual’s credit report for at least seven years, said Ms Musa. In the UK, negative credit records show up for six years and in India consumer payment history is stored for three years.

While five years may seem a long time for UAE residents committed to repaying their debts and wiping the slate clean, it is essential to build a credit profile of a potential customer, said Feroza Malik, managing director at Credit Expert Loans and Overdues Rescheduling Services, a consultancy for debtors with poor credit reports.

“This is the global general maximum tenor on short-term finance such as personal loans, vehicle finance or student loans. The data submitted and recorded builds the credit history over the lifespan of the [loan] and is an influential source of information when assessing the credibility of a debtor,” said Ms Malik.

Currently, any default information, even previously missed instalments that have been rectified within 90 days by the borrower, are viewed as bad credit by most banks, said Ms Malik.

However, credit reports are not the only criteria banks use when deciding whether to approve an application.

Credit assessment is conducted on a case-by-case level and the decision over whether to approve or decline facilities is based on the internal policies of the lending institutions, said Gaurav Bhalla, the founder and chief executive of Lotus Loans and Rescheduling Services, a consulting company which advises clients who cannot afford to service their debts.

“Bad credit history is a matter of individual interpretation at financial institutions,” Mr Bhalla added.

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