Expat LifeTravel

Is the US the Only Country With Credit Scores?

Now that remote work has become the new reality for many, U.S. citizens are dreaming of escaping the risk of coronavirus exposure, not to mention the upcoming election season, by heading to a seaside office in a new country.

Of course, dreaming of expat life is not necessarily enough to get you there. A lot of countries have closed their doors to American travelers, and the ones accepting U.S. tourists might still require that you bring proof of a negative Covid-19 test or self-isolate upon arrival.

There are also the financial considerations. Moving to a new country means adapting to a new currency and likely a new credit system, too. And even if you have good or excellent credit here in the U.S., you can’t take your score with you when you go.

As many immigrants living in the U.S. know, being credit invisible and having to start from scratch is tough. Without any way to prove to banks, and even landlords, that you are trustworthy, you may struggle to get an apartment lease, mortgage or car loan. 

Do your research

Before you move abroad, it’s important to understand the financial systems of your new home. Research whether the country of interest has its own credit bureau(s) similar to the three we have in U.S. (Experian, Equifax and TransUnion). Credit bureaus compile your financial information and use exclusive metrics to calculate your credit score (we use the FICO score in the majority of lending decisions here in the U.S.)

Each country has its own systems, and your score will not necessarily translate to another country. While all the credit bureaus have an international presence (Experian is even headquartered in Dublin), many countries don’t rely on these bureaus, or they use a combination of the big bureaus plus their own reporting and scoring system to evaluate borrowers.

For example, the Netherlands relies on a credit bureau called Krediet Registratie (BKR). Australia has four credit bureaus: Equifax (formerly Veda), Dun and Bradstreet, Experian and the Tasmanian Collection Service. India uses Credit Bureau Information India (CIBIL), which is a TransUnion partner. 

Canada uses the credit bureaus Equifax and TransUnion but has a high score of 900, compared to our 850. The U.K. also has a similar system as the U.S., but different actions like registering to vote might add an extra boost of confidence to lenders and improve your score.

Some countries use a system called “negative reporting,” where you might not get a formal credit score, but if you neglect your debt, negative marks will show up when future financial institutions pull your information.

While every country has a different system, the basic principles are the same: As long as you keep your debts low, make payments on time and refrain from indiscriminately opening and closing a bunch of accounts, you’ll probably be deemed creditworthy in the eyes of international lenders.

Setting yourself up for success

What’s not so obvious, however, is how to go about establishing credit in a new country. First, find out if you have to establish residency to open banks accounts, credit cards and loans. For instance, the property guide French Entree reports that non-residents can apply for mortgages in France without a credit check, but they are subject to a thorough review of their financial records and bank statements for the past three months. 

If you do need a long-term work visa to qualify for loans or credit cards, it will usually be sponsored by an employer or through a government program, such as Australia’s working holiday visa. Begin the process as early as possible.

Opening a bank account is one way to help improve your creditworthiness and establish a financial presence abroad. Depending on which country you live in, having enough assets can be all the proof lenders need to loan you money. Other factors like employment history, income and the length of time you’ve been a customer at the lending institution can also be major factors.

It’s a good idea to try to pay off any debt you have here in the U.S., ideally before you move abroad. Even though it’s harder for lenders to recoup their money while you’re away, you don’t want to neglect your U.S. credit score in case you decide to move back.

Have the right credit card

If you’re interested in spending significant amounts of time abroad, or even moving overseas, use a credit card with no foreign transaction fees until you get your first credit card in your new country of residence. That way you aren’t paying fees every time your swipe your card abroad.

We evaluated 127 popular credit cards offered by major banks, financial companies and credit unions that allow anyone to join and have no foreign transaction fees to find the best of the best.

Here are CNBC Select’s picks for the best credit cards with no foreign transaction fees:

The Wells Fargo Propel American Express® Card is a well-rounded travel card with no annual fee that offers great perks that will be helpful when setting up a new home abroad. Earn unlimited 3X points per dollar spent on dining out, ordering in, travel and a number of streaming services, including Apple Music, Hulu, Netflix, Pandora, Sirius XM Radio Inc. and Spotify Premium. You also get points on car rentals, homestays and ridesharing services. 

Wells Fargo Propel American Express® Card

Information about the Wells Fargo Propel American Express® Card has been collected independently by CNBC and has not been reviewed or provided by the issuer of the card prior to publication.

  • Rewards

    3X points on dining out and ordering in; gas, rideshares and transit; flights, hotels, homestays and car rentals; and popular streaming services. 1X points on all other purchases

  • Welcome bonus

    20,000 bonus points when you spend $1,000 in purchases in the first 3 months

  • Annual fee

  • Intro APR

    0% APR for 12 months on purchases and qualifying balance transfers

  • Regular APR

    14.49% to 24.99% variable on purchases and balance transfers

  • Balance transfer fee

    Introductory fee of 3% ($5 minimum) for 120 days, then 5% ($5 minimum)

  • Foreign transaction fee

  • Credit needed

Pros

  • No annual fee
  • No fee charged on purchases made outside the U.S.
  • 0% APR for the first 12 months on purchases and balance transfers
  • No blackout dates on air travel when redeemed through Go Far Rewards

Cons

  • Minimum reward redemption amount of 2,500 points
  • Balance transfers incur a 3% fee ($5 minimum)
  • Estimated rewards earned after 1 year: $584
  • Estimated rewards earned after 5 years: $2,120

Rewards totals incorporate the points earned from the welcome bonus

Learn more: 5 financial steps to take before your next overseas trip

Information about the Wells Fargo Propel American Express® Card, Alliant Cashback Visa® Signature Card, Capital One® Savor® Cash Rewards Credit Card, and Capital One® Venture® Rewards Credit Card has been collected independently by CNBC and has not been reviewed or provided by the issuer of the card prior to publication.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

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