Al Etihad Credit Bureau, the newly established federal agency, is due to begin trials in July. But that is only the start of efforts to help assess bank customers' creditworthiness, the Ministry of Finance said.
Full credit scoring will be made available next year once enough information has been retrieved.
The start of the pilot programme was the culmination of more than a year of efforts to upgrade the UAE's financial infrastructure, said Obaid Humaid Al Tayer, the Minister of State for Financial Affairs and the chairman of Al Etihad Credit Bureau.
"Al Etihad Credit Bureau has been working closely with the Central Bank and various government bodies over the past 14 months to put the necessary legislative framework in place in preparation for the launch of the UAE's credit reporting system," he said in a statement.
"The board is working hard to ensure that the framework is fully compliant with international best practice to bring the UAE in line with global financial standards."
The start of operations of the first credit bureau with a federal mandate is expected to help banks better assess the risks they take in lending to individuals.
The ministry also says the success of the bureau will enable it to decriminalise cheques, which carry criminal penalties if a payment bounces.
However, UAE nationals are immune from serving jail time for writing a bad cheque.
In theory, the credit bureau will enable banks to lower borrowing rates for good customers and raise rates for customers who miss or are late on payments, rather than basing interest rates upon employer or nationality, which some bankers have decried as unfair.
The process of credit scoring will reflect only financial information and as such should treat each customer fairly, said Younis Al Khoori, the bureau's deputy chairman and undersecretary at the Ministry of Finance.
"It's all the same - there's no distinction on the borrower," he said.
While the bureau will share borrowers' financial information with banks and the Central Bank, individuals' details will not be revealed to the public at large to ensure that privacy concerns are met.
"Anything to do with general statistics, the company will publish according to the UAE's needs," he said. "But anything to do with individuals, the company is very keen to keep secret."
The Ministry of Finance established Al Etihad Credit Bureau last year as a stand-alone entity with a paid-up capital of Dh200 million. The bureau is owned by the federal government, although the Central Bank oversees and supervises its operations.
All functionality will be handled internally by the bureau, although staffing levels are yet to be determined.
The bureau will prepare detailed reports specifying debt levels of all banks, alongside a customer's financial commitments for the next two years. A spokesperson for the bureau declined to comment on whether it was intended to be commercially viable, but selling prepared credit reports to consumers was mentioned as one potential source of revenue.
The federal credit bureau replaced Emcredit, a Dubai-based credit scoring agency that did not have a sufficient mandate to cover all of the UAE's banks. It has been wound down.
The bureau consists of two working groups, the first consisting of 12 banks, the Central Bank and the UAE Banks Federation, the industry lobby group. The second consists of the UAE's telecoms providers, Etisalat and du.
The ministry plans to expand the bureau's providers of information to include electricity companies such as Abu Dhabi Distribution Company and Dubai Electricity and Water Authority. The Ministry also faces difficulties in assessing those customers who are entering the UAE market from overseas who are unable to provide historical data.
Al Etihad Credit Bureau will also establish relationships with international credit bureaux, such as the international player Experian, and US-based Equifax and TransUnion, especially in countries that contribute a large share of the Emirates' foreign residents.
The ministry also hopes to eventually expand the bureau's coverage from individuals to companies so that eventually any company with a trade licence will have its own credit score.