The difficulty of getting credit abroad shocked Aneesh Varma when he moved with his job at JP Morgan to the UK about eight years ago. He struggled to get a bank account, phone contract and credit card. The experience, he says, motivated him to help launch Aire, a London-based startup working to establish alternative credit scores for people with “thin” credit files, including expats.
“The current credit system was established in the last century,” says Mr. Varma. “And while it’s very data-driven, if you don’t have the data, you don’t have access.”
Aire is working to establish something like an international “financial passport” for credit that would draw on data such as a consumer’s professional background, decision-making process, and cognitive intelligence, says Mr. Varma.
But these are still early days for companies like Aire looking to buck the traditional credit-reporting system. In the meantime, financial planners say expats should prepare for the worst when it comes to establishing credit and procuring goods and services that require some credit. Here is a look at a few credit-related stumbling blocks:
Mobile-Phone Contracts: Expats whose employers do not provide mobile phones–or those expats who want phones for personal use–may struggle to get decent contracts and financing for new mobile phones. Some expats say they have ended up using pay-as-you-go plans that lack the convenience of more upmarket, long-term contracts.
Credit Cards: Even with pristine credit in your home country, wealth managers say you will likely struggle to get more than a basic card. Expats, for the most part, will need to establish credit just as they did in their home countries: slowly over time with basic cards that will likely not offer great rewards programs. Some expats have also reported problems getting more advanced credit card technology, such as cards that allow for contactless payment.
Premium Bank Accounts: While expats can usually get basic banking services, they’re less likely to be offered accounts with rewards, perks or benefits such as overdraft protections.
Internet Service: In some countries, broadband providers require that users have good-enough credit in that country to keep up a long-term contract.
Mortgages: In some countries, mortgages for non-citizens are either nonexistent or severely restricted. Some US banks offer mortgages for foreign properties, but be mindful of currency fluctuations. Wealth advisers also recommend being careful about making a long-term purchase if you are not entirely sure of how long you will remain abroad.