If you plan to pack up and move to another country, here’s one thing you can’t take with you: your credit score.
Credit scores reflect the creditworthiness of U.S. citizens. Other countries have their own systems to judge whether borrowers are likely to pay off their debts. If you plan to live as an expatriate, here are a few things you should know.
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Leaving your credit score back in the States may sound appealing if you want to escape your debts by moving abroad. It’s not that simple. Often, when applying for a visa in another country, your debt will be examined. If it appears you’re trying to avoid paying off debt, your application will likely be denied.
If you appear to be moving to avoid paying off debt, your visa application will likely be denied.
Maybe you’ve been good about debt. You may have other reasons why you want to join U.S. expats in popular destinations like the United Kingdom, Australia and Mexico. You still can’t take your credit score.
You’ll find a world of difference from country to country in how credit scoring and credit reports work.
To get an idea how credit-scoring customs can vary abroad, look no further than our neighbor to the north, Canada.
How do credit scores in Canada compare to the U.S.?
Canada’s credit scoring is similar to the U.S. system. For instance:
- Scores range from 300 to 900, and higher is better
- The two major credit reporting bureaus are TransUnion Canada and Equifax Canada
- Scores are calculated using five factors: payment history, outstanding debt, credit account history, recent inquiries and types of credit
This differs slightly from the U.S. system, which has scores ranging from 300 to 850 and uses one additional reporting bureau, Experian. Like Canadians, we also have five factors that determine our credit scores: payment history, credit utilization, length of credit history, types of credit in use, and new credit.
Canadians have credit ratings as well. The ratings — assigned by the lenders and reported by the credit reporting agencies — consist of letters and numbers. Here’s how it works:
You are assigned a number from 1-9:
- “1” means you pay all of your bills within 30 days of the due date
- “9” means you never pay your bills
- “0” means the account is too new to determine your payment habits
You are assigned a letter, either I, O or R:
- An I means you have an installment loan, or a loan for which you make a fixed payment each month until a predetermined date.
- An O means you have an open credit account, or an account with a balance that must be paid back at the end of each period.
- An R means you have revolving credit, like credit cards, in which you make regular payments, but the balance and minimum payment may vary.
These letters and numbers are put together to report your loan type and payment record. For example, if you have an installment loan and you always make timely payments, your credit rating would be “I1”. However, if you have revolving credit and never make your payments, your rating would be “R9.”
The U.S. doesn’t have a comparable credit ratings system. It relies mostly on credit scores to determine a potential borrower’s creditworthiness. Worth noting: The same type of information in Canada’s credit ratings is also seen in U.S. credit reports. And the information in your credit reports is what determines U.S. scores.
You’re gone. Will your U.S. credit profile wait for you?
If you leave the United States to live as an expat for a while, remember to maintain your U.S. credit for when you return. This will be easy if you plan to visit family or friends in the U.S. on a regular basis (like once a year), because you can make use of your U.S. credit cards during these trips. If return visits are unlikely, it’s a good idea to make a few purchases each year that don’t require you to be in a particular country, for instance purchasing ebooks on Amazon or paying your Netflix subscription.
This article was updated Aug. 8, 2016.