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Understanding how your credit score works in the U.S. can be a challenge in its own right. But did you know other countries have their own ways of assessing your creditworthiness too?
If you’re planning on living abroad, understanding how credit scores work in other countries could be essential to your wellbeing—both while abroad, and if/when you come home.
Here’s what you need to know about credit scores in other countries.
How Does Credit Scoring Work In the United States?
In the U.S., the credit scoring system works like this: lenders or other people you do business with report the details of your financial transactions—positive and negative—to one of three credit bureaus (Equifax, Experian or TransUnion).
Then, a credit scoring company like FICO takes that data and generates a numerical score. When you apply for credit or accounts in the future, your potential lender checks the information on file with the credit bureaus and your credit score to make a decision about whether to lend to you or not.
How Do Credit Scoring Systems Work In Other Countries?
Each country in the world has its own way to assess creditworthiness. For the most part, these are the main aspects of credit that vary from country to country:
- How long information stays on your credit report
- Who can contribute information to your credit report
- How many credit bureaus are in a country (if there are any at all)
- Whether credit bureaus are for-profit or nonprofit, and who owns them
- What types of information—positive or negative—is recorded on your credit report
- Whether lenders are required to consult your credit report before deciding to approve you or not
Let’s look at a couple of examples.
Canada
Canada’s credit scoring system looks roughly similar to the U.S. However, instead of three credit bureaus, it only has two: Equifax and TransUnion. While Canada calculates credit scores similarly to the U.S., its scores range from 300 to 900 instead of 300 to 850.
France
France’s system, on the other hand, is different than what you may be used to. It doesn’t have credit reporting agencies. Instead, it’s done on a bank-by-bank basis.
For example, you’d open an account at a bank and start a relationship with them. The bank would then code you as a “yes,” “no” or “maybe” for any new credit applications. By law, banks aren’t allowed to share this information with other banks, so your credit isn’t transferable across different institutions.
Does My U.S. Credit Score Follow Me?
Your U.S. credit score and report is only applicable to banks and lending institutions in the U.S. You’re free to print out a copy of your credit score and report to show to potential lenders in other countries, but keep in mind that they’re not required to consider it.
The same holds true for your credit score from any other country—it’s only applicable within that country itself. Data laws prohibit financial institutions from sharing your information across borders. Thus, it’s possible to have credit scores in many countries simultaneously if you live a travel lifestyle. But you’ll need to build your credit score anew in each country you move to.
How Can I Apply for Credit Outside of the U.S.?
If you’re interested in establishing credit in a particular country, the only way to know how it works is through in-depth research. Expat groups are a great resource for this, but keep in mind that the best information will come directly from the source—i.e., any financial institutions or credit agencies within the country itself.
There may be requirements you need to meet that you wouldn’t have to in the U.S. For example, in the U.K., voter registration can increase your credit score. Lenders use it to verify your identity and address. As soon as you’re eligible, it’s a good idea to register so you can vote and be seen as more creditworthy.
How to Maintain Your U.S. Credit When Leaving the Country
Just because you’ve left the U.S. doesn’t mean that your credit score shuts down. It’ll continue
ticking away even while you’re living abroad. While negative items listed on your credit report will fall off after 7 to 10 years, it’s a good idea to actively keep your credit score in good shape for when you come back. Here are simple ways to do that:
- Keep a U.S. address, which you can easily do by paying for virtual mailbox services for nomads.
- Keep your U.S. bank account and credit cards open, and continue to use them to keep them active (watch out for foreign transaction fees though).
- Keep a close eye and check your credit report on a regular basis for any signs of errors or fraud.
Raise Your FICO® Score Instantly with Experian Boost™
Experian can help raise your FICO® Score based on bill payment like your phone, utilities and popular streaming services. Results may vary. See site for more details.
