Taking up residence in a new country requires a lot of planning. Securing the right work visa, finding places to live, buying a car, etc., are all necessary evils of relocation. The bad news? Even if you are a model U.S. citizen, your creditworthiness may not follow you beyond the border.
Contrary to popular belief, a credit score is not universally recognized. Credit bureaus and scoring companies that predominate in one country may be a minor player — or even a nonexistent one — in another. So, for example, while Equifax, Experian and TransUnion are the dominant credit bureaus in the United States, this isn’t always true everywhere else. This revelation can surprise many relocators and presents a number of important questions:
How will I establish credit in a new country?
Since your current credit score may hold little value in a foreign land, it’s important to play by your new country’s rules. Do some research before relocating to determine how credit reporting is conducted there. Depending on the location, you may find a less-than-advanced system in place. For more developed countries, there are plenty of ways to leverage your current accounts. For example, creditors like American Express will keep your card active while transferring its use elsewhere, and, as a result, will likely report to whichever credit bureau(s) maintain consumer files there.
Will I be able to secure a home loan or other financing?
There is no definite answer to this question, but you may have trouble proving creditworthiness right away. Without a credit history in place, foreign lenders have no way of gauging your reliability. Despite this daunting paradox, a little creativity could help matters. Valueless or not, your U.S. credit report does provide a list of accounts, payment history, credit length, etc. Provide lenders with a copy to illustrate your reliability and fiscal experience. While there are no guarantees, it can’t hurt to have such a tangible record on your side. Moreover, consider asking your employer for support. Request a letter from your boss that highlights your income, years with the company, and your level of responsibility. Lenders may be encouraged by this kind of information, hopefully encouraging them to help you get the financing you need.
How will relocation affect my existing credit score?
Although the U.S. credit bureaus do not penalize consumers for relocating, some factors could carry negative outcomes:
· Inactivity can hurt your credit over time, making it seem as though you have fallen off the financial map. Preserve your current credit scores by keeping your American accounts in use.
· Revolving accounts can hurt your score if they have significant balances. Moreover, when canceling accounts like utility services, be sure your balance is zero, because a final, unpaid bill could cause long-term damage.
The bottom line: Consider your financial future before saying “bon voyage” to America. A little planning could lessen the roadblocks on the journey ahead.