Is My Credit Score Useful Outside the US?

If you go worldwide, you will most likely discover that the American version of the credit score is a financial notion that folks living outside of the United States are unfamiliar with. Credit scores, as we know them in the US, are a measure of creditworthiness.

While other nations may not utilize the credit score in the same way that we do as a measure of creditworthiness, they do have mechanisms in place to analyze a consumer’s risk of default. In reality, Equifax operates or has stakes in 24 countries throughout North America, Central and South America, Europe, and Asia Pacific. 1

However, would your credit score affect while traveling abroad? The simple answer is no.

Key Takeaways

• A credit score earned in the United States has no influence on your abroad financial affairs; it will neither hinder nor benefit you.
• International credit scores are not yet possible due to a lack of technology, and regulations restrict the exchange of credit information across borders.
• Auto dealers, credit card companies, and other lenders each have their own method of determining your creditworthiness, which is sometimes nation or area specific—outstanding debt and income verification are often necessary.
• However, it might be difficult for some expatriates to establish creditworthiness on foreign land; typical credit-building tactics such as obtaining a shop credit card or a pre-paid debit card can assist.
• If returning to the United States is a possibility, be sure to maintain U.S.-based credit cards active and payments current; any other premiums or payments must also be kept current.

Up in the Air

Many nations, notably Canada and the United Kingdom, have credit rating systems that are not dissimilar to the American system. Not only is there no communication between the systems, but anticipate to be shocked by significant variances in the components required to create credit in other nations. In the United Kingdom, for example, lenders see voting behavior as a favorable indicator. This implies that until you become a British citizen and register to vote, you’ll have to look for other methods to build credit in the UK.

It’s not that offshore lending institutions don’t value the credit history you’ve built in your own country. Rather, there is a dearth of processes in place in the United States to properly analyze a prospective client’s credit history. Even a nation with a sophisticated banking and credit system, such as Germany, lacks this capacity, and for good reason.2

While technology may have removed an early obstacle to the type of global credit scoring system that is now theoretically viable, national and international regulations prohibit exchanging credit records with foreign lenders. The objective is to safeguard consumers: the rising tendency of identity theft, which preys on client data, necessitates such laws.

What to Expect

What can you anticipate if you want to create a credit card with a local bank or purchase a vehicle if international lenders won’t have access to your American credit score? Banks and financial organizations in other countries may enquire about outstanding debts in your home country. While such enquiries may not be followed up on, it goes without saying that honesty is essential when dealing with foreign financial institutions. Expect to provide salary proof from your present job, which should be rather easy to get from your new workplace.

So-So Credit

If you’ve routinely missed credit card payments or defaulted on a vehicle loan, the prospect of starting again (at least in terms of credit) may add to the allure of an international trip. This new beginning also applies to persons who have filed bankruptcy: According to figures issued by the Administrative Office of the United States Courts, annual bankruptcy filings reached 544,463 in 2020, compared to 774,940 in 2019. While this is a decline of 29.7%, it is still a significant figure. 3

While an overseas migration may provide a new start for people whose credit score in the United States prohibits them from obtaining the best interest rates on significant purchases such as automobiles or houses, it is not a panacea (especially if you plan to repatriate to the United States in the future).

Bankruptcy, like other financial commitments, will not erase from your credit history in the United States, but it will have significantly less (if any) influence outside.

Excellent Credit

Though expatriation may make your great credit score less significant, it does not rule out its use. While your credit history will not instantly transfer to foreign lending institutions, there are various strategies to leverage your good financial past when working with an international bank. One easy step would be to print out your credit report and any supporting papers to bring to lender appointments. Another approach? Before you make the change, get a printed copy from your bank and sign a letter on official stationery outlining your credit history.

What is the future of personal finance for American expats in other countries? Recent improvements in U.S. banking and tax rules hint to increased, not less, collaboration between American and foreign institutions. However, many Americans who accept employment abroad discover the opposite: it is difficult to get loans for houses or automobiles in nations where they have no past credit history.

Building Credit Abroad

What are you going to do in the meantime? First and foremost, do not surrender your US credit cards. Maintain active savings, bank, and credit card accounts, if feasible. There are two caveats: Follow any minimum use criteria on the account to avoid it being terminated for inactivity, and use a card that does not charge international transaction fees. Even if you live overseas, all purchases made with your US credit card will be considered a foreign transaction and will be added to the cost of each purchase.

If you are unable to get a regular credit card in your new nation, you may need to begin by applying for a shop credit card (despite the high-interest rates they charge).Make frequent purchases and pay your bills on time to begin establishing a local credit history. Meanwhile, establish an account at a nearby bank and get accustomed to paying cash for most transactions.

Be aware that if you return to the United States, your credit score will be waiting for you; staying overseas does not invalidate your credit score in the United States.

Coming Home

When the American author Thomas Wolfe popularized the phrase “You can’t go home again” in 1940, he was probably not talking to credit ratings. (To be fair, this was 49 years before FICO scores were introduced.) Depending on the duration of your vacation abroad, your credit – good, terrible, or ugly – will be waiting for you when you return.

If you intend to stay in another country for at least seven years, any delinquencies or unfavorable marks on your credit record will have vanished. If they remain, you can contact the credit agency and request that the expired bills be removed off your record. Fortunately, with constant work, a poor-to-below-average credit score may be rebuilt in a few years, although catastrophic financial setbacks, such as having a house in foreclosure or outstanding debt in collections, can take seven to 10 years to settle.

If you arrived in a foreign country with great credit, you may be concerned that your strong credit history may “disappear” after a few years. While reestablishing solid credit after a decade or more without U.S. financial activity may be difficult, there are numerous strategies to avoid a big issue.

To begin, there is no need to cancel all of your accounts in the United States before departing: Maintain active savings, bank, and credit card accounts, and use them enough to keep them open until you return. The same is true for your chosen country’s accounts: Keep your international accounts and credit cards open until you re-establish credit in the United States, unless it is absolutely not possible. Just be sure to follow the new FBAR requirements, which require all Americans with foreign financial assets to declare them to the US government.

Finally, see whether any of your current credit card accounts have a worldwide card connection in the location where you intend to move. For example, if you currently have an American Express account in the United States, your cardholder status may assist you in establishing local credit in your new nation while preserving your excellent credit history in the United States.4

While there is no fast answer for mending poor credit, whether solo or shared, going abroad may provide an opportunity to rebuild your credit history with a better conclusion.

The Bottom Line

If the notion of leaving your excellent credit score behind bothers you, don’t worry: it will be there when you return if you return within a few years and/or keep your accounts current. Moving overseas may provide a new start in both financial and cultural terms if you’ve suffered with your credit.

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