As an Expat, you may have heard that your credit score does not transfer from country-to-country, but you may be asking – what is a credit score?
According to the “2014 Expat Review”, credit is one of the top three challenges for Expats who moved to the United States. This challenge is not limited to the U.S.; it applies to Expats around the globe. When you move to a new country, your credit score does not move with you – no matter how good it was in your home country. When you arrive in the new country, your credit score will be a 0. With all this talk about credit and its challenges, it’s very important to understand what is a credit score.
A credit score is based off your history with lenders and determines whether you’re eligible for things such as credit cards, loans, etc. Credit scoring and reports differ depending on the country you’re moving to. Below is an explanation of how credit is determined in the United States.
What is Credit?
In the United States, FICO® is the most common model for credit scoring. Your credit score is a three-digit number generated by a mathematical algorithm using information in your credit report. Your credit report is designed to predict risk, specifically the likelihood that you will fail on your credit obligations.
Your FICO® credit score is consisted of a number of factors:
There are two types of credit: Secured credit and Unsecured credit
Secured credit has less risk for the bank, and always has lower interest rates. Examples are home loans and car loans.
Unsecured credit has more risk for the bank, and, therefore has a higher interest rate. Examples are credit cards and personal loans.
Without a credit score, it can be difficult to receive a loan from a bank, open credit cards, apply for a mortgage, and even purchase a cell phone. This poses a huge problem for Expats who just moved and had no credit score to be judged off of. Luckily, there are Expat specific companies that offer loans and credit to Expats WITHOUT a local credit score. International AutoSource, offers Expats leasing, financing, and purchasing without a local credit history. Once you work with an Expat company, such as International AutoSource, you will have begun building the foundation of your credit score. With this foundation, you will be able to go to non-Expat vendors to secure loans in the future.
Remember to take care of your newly established credit score!
How to Maintain Good Credit
It is important to maintain a good credit score to get better interest rates and lower down payments. Below are a few tips for maintaining good credit:
- Always make your payments on time.
- Do not overextend yourself by taking out too much credit at once.
- Do not apply for credit unless you are serious. Too many hits on your credit can lower your score.
- Know what your credit score is and how you stand.
- Utilize free credit checks and credit monitoring services.
What Can Ruin Your Credit?
There are multiple actions that can damage and hurt your credit score. Rebuilding a damaged credit score can take a long time, so it is important to avoid these credit-damaging actions, if possible:
- Late Payments
- Too many loans