Establishing Credit


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Is My Credit Score Useful Outside The US?

Youve packed your boxes, leased your condo, sipped champagne at your bon voyage party and learned a few essential phrases in French (or Korean). One phrase that you probably won’t need to learn, however, is credit score. That’s not because they don’t exist in other countries: in fact, the American credit bureau Equifax operates in 15 countries spread across Europe and Latin America.

For some globetrotters, the headache that arrives the morning after the bon voyage party can’t be blamed on the third glass of champagne. It might be from that anxiety-provoking question: Will my credit score matter overseas?

The short and sweet answer– especially sweet to those whose credit score is in the lower ranges (see How Bad Is My Credit Score?) – is that no, your credit score won’t follow you overseas. In that sense, your credit score will do you less damage than a nasty cold caught at the JFK departure gate.

Up in the Air

The moment your 747 reaches altitude on the way to London Heathrow or Tokyo Narita airports, your American credit score does not exactly disappear into thin air. However, its power – at least on foreign soil – is negligible to nonexistent. Its true that many countries, including Canada and the UK, have credit scoring systems that are not entirely dissimilar to the American system. Yet not only is there no communication between the systems, expect to be surprised by key differences in the necessary components of establishing credit in other countries. For example, in the United Kingdom, lenders consider voting behavior as a positive sign – which means that unless you become a UK citizen and sign up for electoral polls, youll have to seek out other ways of establishing credit.

Its not that overseas lending institutions dont care about the credit history you´ve established in your country of origin. Countries such as Germany – which, as the financial stalwart of the European Union, has a highly sophisticated banking and credit system – simply lack the systems to thoroughly investigate a potential clients credit history in the United States.

While technology may have posed an initial barrier for the kind of global credit score system that might now be technically feasible, laws at the national and international level prohibit sharing credit histories with overseas lenders. The reason is consumer protection: The growing trend of identity theft, which preys upon customer data, makes such legislation essential.

What to Expect

If foreign lenders will not have access to your American credit score, what can you expect if you want to, say, open a credit card with a local bank or buy a car? Overseas banks and lending institutions may indeed inquire about outstanding debts in your home country. While such inquiries may not be followed up with verification, it goes without saying that it´s crucial to be truthful when dealing with overseas financial institutions. Expect to furnish income verification from your current employer, which should be fairly simple to obtain from your new place of work.

If Your Credit is So-So…

If youve consistently missed credit card payments or defaulted on a car loan, perhaps the promise of starting from scratch – credit-wise, at least – is one added appeal of an overseas adventure. This fresh start applies to those who have declared bankruptcy as well: Although total filings by businesses and individuals fell to 1.03 million in 2013 from 1.19 million in 2012, according to a report from the American Bankruptcy Institute, thats still no small number. In 2014 more than a million bankruptcies – both business and individual – were filed in the United States. While a bankruptcy doesnt “disappear” on your credit back home (see Bankruptcy and Your Credit Score), it will have far less power (if any) overseas.

If news that your credit score means about as much in Bogota as your local gym membership card provokes a sigh of relief, great. Just don’t get too relaxed. While an overseas relocation might offer a fresh start for those whose credit score back in the States prevents them from getting the best interest rates on major purchases like cars or homes, it’s not a catch-all solution – especially if you plan to repatriate to the United States in the future.

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