Does postponing a bank instalment hurt your UAE credit score? Etihad Credit Bureau explains

Abu Dhabi: Etihad Credit Bureau stated that postponing bank instalments, after obtaining official approval from the bank, does not negatively affect the customer’s credit rating, as long as it is recorded as an approved postponement. However, defaults and late payments appear in the credit report and may be reflected in the customer’s creditworthiness. The company explained that the credit report includes a record of loan repayments and financial obligations over the past 36 months, enabling the customer to review their regularity in repayment and identify any late payments that affect their creditworthiness, noting that the credit rating number expresses the extent of an individual’s ability to meet their loans and financial obligations. It added that this means a deferral approved by the bank is not treated the same as an outstanding instalment, because the bank adjusts the repayment schedule according to the new agreement with the customer. However, if the customer stops making payments voluntarily, or submits a deferral request without waiting for official approval, the instalment may be recorded as overdue. According to the terms announced for the instalment deferral program at a number of national banks where the largest percentage of individual customers are concentrated, “the deferral does not affect the record with the Etihad Credit Information Company, provided that the loan is regular and not overdue.” Banks explained that the postponement request is subject to review and approval according to each customer's case, and is not applied automatically once the request is submitted. Although the approved deferral does not affect the credit rating in itself, it may raise the overall cost of financing, as interest or profits continue to be calculated during the deferral period. This may result in extending the loan term, or modifying the value of subsequent instalments or the final instalment, depending on the type of financing and the conditions applied by the bank. The Consumer Protection Standards issued by the Central Bank of the UAE allow banks and licensed financial institutions to approve the postponement of one or more instalments as they deem appropriate, provided that the postponement does not lead to an increase in future deductions from the customer’s salary that exceeds the debt burden ratio determined by the Central Bank. The standards require the bank, when agreeing with the customer on a modified payment arrangement, to provide him within 10 working days, a clear written disclosure that includes the modified payment schedule, and details of how the amounts are distributed between interest or profits and the outstanding balance. In the event of previous arrears, the bank must inform the customer that the data relating to them will be shared with the Etihad Credit Bureau. The potential repercussions of continued non-payment should also be clarified, including a negative credit rating and restrictions that the customer may face when applying for a new loan or financing. Customers wishing to postpone their instalments are advised to contact the bank before the due date and obtain written approval that clarifies the start and end dates of the postponement, how it will be recorded for credit, the potential additional interest, and any changes to the loan term or instalment value. The instalment remains due unless the customer receives final approval from the bank for the postponement request.