If you live in the USA, your credit score is an important part of your life. Sometimes it can feel like we are chained to our credit scores. But what happens when you move to another country? Do other countries have credit scores? Does your credit score from America transfer to other countries? Is your credit score useful outside the US?
Quick facts about your credit score in other countries:
- The credit you’ve built in the US has no effect on your credit in other countries. Your American credit score can neither help nor harm your chances for loan approval.
- The USA is not the only country with a credit scoring system.
- There is no universal credit score. In other words, your credit in one country has no bearing on your credit in another.
- Generally, the laws of sovereign nations prohibit countries the sharing of peoples’ credit scores.
- Each country has its own system for assessing creditworthiness. Lenders consider factors such as employment and current debt during the loan approval process.
- On arrival to a new country, you can inquire about local credit-building techniques.
- If you plan on returning to the US, it is a good practice to keep some of your Americal based credit cards active. Make sure that you use your credit cards and make payments on time.
Is my credit score useful outside of the USA?
Your American credit score isn’t something you should worry about when moving to another country. While credit score isn’t unique to the US, lenders in other countries aren’t concerned with your American credit history. If you have a low credit score, don’t worry. Your credit score won’t follow you outside of the USA.
Does my credit score follow me to other countries?
Whether you have a credit score so high other people can only dream of or a score that needs a lot of improvement, it will not follow you to other countries. Depending on your credit history, this may be a disadvantage or a chance for a new beginning.
When you move to a new country, your credit score won’t disappear. By the time you return to the USA, UK, or any other country with a credit score system, your score may have gone up or down. For instance, derogatory records such as foreclosures or bankruptcies might have dropped off your report since you left the USA or UK. Or you might have repaid outstanding debt while you were out of the county.
But while you’re abroad, you should focus on building your credit in an effort to improve your credit score.
Building your credit score in a foreign country.
When you move to a different country, you’ll need to start building your credit score. Arriving in a new country means you’re starting anew, as long as your credit is concerned – this is your chance to prove your credit-worthiness.
While building credit from scratch can be time-consuming, it can be much simpler than repairing bad credit.
These tips can help you start improving your credit score:
- Open a bank account with an international bank. If you have an international bank account before leaving your home country, it may be easier to open an account in your destination country. You might be able to ask the US branch to run a credit check for you to share with the branch at your destination.
- Maintain your USA credit score. If you know that your move is only temporary, you should maintain your US credit agreements. Work paying down debt, including credit card debt. Lowering your debt will keep your credit score in good shape when it’s time to return to America.
- Research your destination country. Each country has a unique way of monitoring credit activities. Study the credit system of your destination before leaving your home country, as it might be completely different from the US.
Building your credit score in the USA
Just arrived in the US Before you start making large credit purchases, you’ll need to build up your credit.
Here’s how you can start building your credit:
- Get a secured credit card. You can get a secured credit card to start building your credit score. Secured credit cards require a refundable security deposit. Your deposit amount is the “credit limit” on your card. Secured cards are great for building credit or repairing bad credit.
- Use a co-signer or guarantor. If you have no credit history, lenders might require a co-signer or guarantor. A co-signer is either a good friend or a family member. Such a person could help you get a loan or a credit line, helping you build your credit score. There is a risk for the co-signer because he agrees to repay your debts if you fail to do so.
- Start small. Even a small credit line can help you build your credit score.
- Pay your bills. Something as simple as paying your bills on time will help you improve your credit score.
- Request a copy of your home country credit report. This is a long shot, but if you have an excellent credit history in your home country, it might help you get credit in your destination country.
Do other countries have credit scores?
Before you relocate to a new country, it’s critical to understand your new home’s credit system. Find out if the country you move to has a credit bureau or something of the sort. In the United States, credit bureaus compile your credit history and use their own proprietary metrics to calculate your credit score. Although the credit score is an imperfect system, it is an important part of personal finance in America.
Every country has its own systems to evaluate creditworthiness. Don’t expect your credit score in one country to impact your credit in another country. The simple fact of international credit is that it doesn’t exist. Credit is unique to each country. Even if a credit bureau has an international presence, it doesn’t mean that one country relies on another country’s credit bureau.
Here are a few examples of credit systems and bureaus outside of the USA:
- Australia – Equifax (formerly Veda), Dun and Bradstreet, Experian and the Tasmanian Collection Service
- United Kingdom – Equifax, Experian and Transunion
- Netherlands – Krediet Registratie (BKR)
- Germany – Schufa
- India – Credit Bureau Information India (CIBIL), a TransUnion partner.
If you are moving to Canada, you can expect to work with either Transunion or Equifax. The Canadian credit scoring system is similar to the US credit system. But the highest Canadian credit score is higher (900) than in the US (850). Although the U.K.has a similar credit scoring system to the U.S., the UK considers some different activities such as voter registration. Active voter registration could slightly improve your credit score.
Other countries might focus on delinquencies instead of a credit score. This system is called “negative reporting.” With negative reporting, financial institutions rely on reported delinquencies instead of a credit score when you apply for a loan.
While each country has a unique credit reporting system, the basics of credit history remain unchanged: As long as you pay your bills on time, keep your debts low, and have a job contract, you’ll have a pretty good chance of getting credit.
How do credit scoring systems work in other countries?
In many countries, credit scores are calculated by analyzing:
- Payment history
- Credit history – how long you have had the credit line(s)
- The types of credit you have – car loan, mortgage, credit card
- The total number of credit lines or outstanding loans
- Delinquencies – foreclosures, debt collections and bankruptcies
- Credit balance
- Credit limit
Does my US credit score transfer to Canada?
Canada’s credit system is very similar to the American credit scoring system. Yet your credit score doesn’t follow you when moving to Canada. Both Equifax and TransUnion operate in Canada. Similar to how credit is scored in the USA, credit in Canada is judged by your debt, employment history, and payment history.
The credit point system is different in Canada. Canadian credit scores range from 300 points to 900 points. You will need a minimum credit score of 680 to get a good interest rate on a home loan.
Does my US credit score transfer to the UK?
The major credit bureaus in the United Kingdom are:
The major bureaus in the USA are:
You are correct; the USA and the UK use the same credit bureaus. But that doesn’t mean your credit score in one country translates to a credit score in the other country.
Each credit agency in the United Kingdom has a unique credit scoring system:
- Experian issues credit scores between 0 and 999 point scale. If you have a credit score between 961 and 999, you can expect to get the best interest rates.
- Callcredit provides a score of one to five. If you have a score of five with Callcredit, you have “excellent” credit.
- Equifax issues credit scores from 0 to 700. A credit score between 466-700 is ideal.
The credit bureaus in both countries collect personal information about you and information about your credit activities. Even though there are similarities in how they collect information about your credit, the way they provide information to lenders is different.
Does my credit score transfer to Japan?
Unlike the United States and the United Kingdom, Japan doesn’t have a credit scoring system. If you decide to move to Japan, your U.S. credit won’t matter. The only possible exception is if you bank with an international bank that also has a business presence in Japan.
Credit in Japan is based on the relationship you have with the bank. Other factors such as salary and employment are also critical when trying to obtain credit. You might find a bank that doesn’t have a problem with lending to foreigners. But don’t be surprised if you run into a bank that isn’t going to lend to you.
Do you need credit in Mexico?
If you are thinking about moving to Mexico, you might wonder if you need credit in Mexico. Credit is essential for Americans who want to buy a property in Mexico. Although obtaining credit in many countries can be difficult or outright impossible, that’s not the case in Mexico. The loan process in Mexico is fairly straightforward for Americans.
If you plan on purchasing a property in Mexico, you should hire a reputable local lawyer and a local real estate professional. Even if you have bought and sold properties in the USA, you must have a lawyer on your side when buying a Mexican property.
When buying a house or condo on credit, as expected, there is some paperwork. US citizens requesting credit in Mexico is fairly common. Lenders understand the business opportunity of providing mortgages for Americans residing in Mexico.
When you apply for a home loan, banks will ask for your residency papers. Your valid visa should suffice. If you haven’t established legal residency in Mexico yet, you need to work on that before applying for a mortgage. You can work with professionals such as an immigration attorney to help you through this process.
Is there a credit score system in Mexico?
Credit is important in Mexico too. There are organizations that collect credit information on individuals:
- Círculo de Crédito
- Dun & Bradstreet
Are credit scores fair?
Lenders use your credit score to evaluate risk before offering your credit. Credit scoring systems in some countries only focus on negative marks. Other countries such as the USA rewards people with a higher credit score for paying their bills on time and not using excessive credit.
Some may consider credit scores an imperfect system for the following reasons:
- Credit scores focus too much on your past and not on your present. Negative credit activities in the past will have an impact on your credit score in the future. If you have filed for bankruptcy in the past, it will put a dent in your credit for up to 10 years in the future.
- Credit bureaus don’t reward you for not using your credit cards. You might think that your credit score would increase when you don’t use your credit cards, but that is not the case.
- The amount of your savings doesn’t impact your credit score.
- Not all payments improve your credit score. If you are making your mortgage or credit card payments on time, you can expect your credit scores to improve over time. But paying medical bills, rent, or utilities on time will not help your credit score.
- Credit scores don’t calculate your income. Even if you get that big promotion with a raise, your credit score won’t get a boost from it. Credit reporting bureaus don’t consider savings, job status, or income a predictor of creditworthiness. Instead of your income, they care about your payment history, credit lines, credit utilization, etc.
- You could have a great credit score even if you are out of work for an extended period. Employment is not factored into your credit score.