If you’re moving back to the United States after an extended period — more than a year — living abroad, you may be in for a nasty surprise when you apply for a credit card. Even if you’ve used credit responsibly in the past, a lack of active accounts in this country means there may not be enough recent credit data on you for a card issuer to form a complete picture of your creditworthiness.
In the worst case, it’s almost as if you have no credit history at all.
“You’re a financial grown-up, and then all of a sudden you have to go back to being a pre-adolescent,” says Dana Twight, a financial advisor in Seattle who has worked with Americans living overseas.
That’s why it may be necessary to build credit the same way you did when you were just starting out in life. It will take some time — but you can do it.
Getting a credit card now that you’re home
Let’s say you haven’t kept any credit card accounts active, either because you never expected to return to the U.S. or because you didn’t know it might be hard to get access to credit if you didn’t have a recent credit history in this country.
The first thing to do when you get back is see where you stand. Twight recommends checking your credit report immediately to see exactly which accounts are active, if any. This will also help you make sure there has been no fraudulent activity in your name while you were gone.
Arikia Millikan, a journalist who spent two of the last three years traveling in Europe and Asia, had to contend with a huge pile of mail — including alarming letters from a bank — when she returned to her apartment in Brooklyn, New York, this spring.
“I thought someone stole my identity,” Millikan says. “But it was a mistake on behalf of the company.”
Many people living overseas get used to a cash-based economy. But in the U.S., most people believe that they need, at minimum, a bank account with a debit card attached and at least one credit card.
If you’re starting over, it might be necessary to get a secured credit card to rebuild your credit. This is a card that requires you to put down a refundable security deposit; the amount you put down is usually equal to your credit limit. After making small purchases on the card and paying it off in full every month, your credit score should eventually rise enough that you can qualify for an unsecured card.
Another option is to become an authorized user on another person’s account. If you have a parent or adult child with a long credit history in the U.S., being added to his or her account could help you re-establish a credit file. Keep in mind that not all credit cards report authorized user status to the credit bureaus. Credit activity can help you only if it’s reported to the bureaus.
Why rebuilding credit is important
By now you may be wondering why you should even bother to rebuild your credit if you don’t have an immediate need to borrow money. But credit scores and histories are used for much more than opening a credit card account, financing a car or getting a mortgage. Credit scores measure only your ability to manage debt, but they’ve come to be used as a gauge of overall responsibility. Looking for insurance, a job or a lease? Need to get a cell phone or sign up for utilities? All of these things can be more difficult and more expensive without good credit.
But suppose you do need to borrow. Credit can be almost impossible to access if you don’t have a track record of managing debt wisely. And unfortunately, that credit card bill you paid faithfully before you moved abroad won’t help you much if the account has been closed or inactive for many years.
“That’s the thing about credit,” Twight says. “You have to have trackable activity that’s regular and reportable.”
If you’re planning to move abroad
If your international adventure is just about to begin, you have an advantage. It’s easier to re-establish credit when you return to the U.S. if you take steps to help yourself before you leave. Twight recommends that expats keep at least one credit account active and make regular purchases on the account. If Amazon ships to the country where you’ll live, keep a U.S. card linked to the account. That’s one of Twight’s favorite ways for her clients to keep an American credit card account active.
“If you use Amazon, you don’t turn into a financial zombie when you’re out of the country,” she says.
Another option is to keep a joint bank account and a credit card open in the United States with a trusted relative.
“Maybe you have a card with a $3,000 limit that you and your mom share,” Twight says. That way, if you decide to move back or need to return suddenly because of a medical emergency, you’ll have immediate access to credit.
Betsy and Dan Norton-Middaugh, both teachers at the American School in Taichung, Taiwan, have an adult daughter in Seattle who takes care of financial matters they can’t handle remotely. She keeps an eye on the house they still own in the Seattle area, and she helps them file their taxes. But for the most part, Betsy Norton-Middaugh says, “we can manage our accounts online with no problem.”
During the four years they’ve lived in Taiwan, the Norton-Middaughs have been able to get by with just a local ATM card, since cash transactions are the norm there.
If you decide to make do with an American credit card, look for one that doesn’t charge foreign transaction fees. Here’s a list of our favorites.
An easy homecoming
Returning from a long stint in another country requires a lot of hard work. There’s a home to close up in the country you’re leaving and a home to find or reopen in the U.S. Plus, there’s always the hassle of shipping your belongings across international borders.
But rebuilding your credit doesn’t have to be a source of stress. Once you’ve checked your credit reports, you’ll have a clearer sense of whether you’ve dropped off the credit map completely. Then it’s just a matter of rebuilding your credit file until you can qualify for the best credit card for your needs.