If you’re moving to America, there’s a lot to think about and prepare for your relocation. One thing you might not have considered is your credit score in the USA. When you have a good credit history in the UK, it’s quite easy to overlook this important number in any international relocation.
However, your credit score is not a portable asset. Moving to the USA for the first time means essentially building your credit history from scratch. Even if you have no immediate need for lines of credit, no credit history can prevent you from getting simple necessities like a local mobile phone or internet contract, opening an American bank account or even taking out Direct Debits on your bills. If you’re planning on renting, your credit history can be a deciding factor, depending on your landlord.
Therefore, tackling the issue of your US credit score as an expatriate is something that needs to be dealt with sooner rather than later. Here we explore the US credit score system, as well as present some top tips to help build credit fast.
As in the UK, your credit score is built using various algorithms to predict how likely you are to default on credit payments. The more you borrow and pay back reliably, the better your credit score.
Whether you’re in the UK or the USA, the three main credit agencies are Equifax, Experian and TransUnion. You may also see your credit score referred to as a FICO score or a VantageScore. While they all use slightly different algorithms, chances are that your credit score is broadly the same whichever report you access. However, due to international data protection laws, credit scores are only applicable in your country of residence. Each country also evaluates credit differently – another reason you can’t take your credit score with you.
Having a zero credit score or a low credit score impacts on whether you can access future credit. Low credit ratings can also mean higher rates if you do get a loan (for example on a car), so a good credit score can save money in the long run.
Building your non-US citizen credit score should be a priority upon moving to the USA as an expat. We’ve put together some top tips for building a solid credit history.
Opening a bank account in the USA is one of your first and most important tasks after relocation, along with building a credit history. If you are already with a bank that has an American presence, you might find this process much simpler. There are also other expat-friendly banks, and banks that may allow you to open an account with a letter of verification and confirmation of your income from your employer. You can usually start this process from the UK before relocation.
You will need a US Social Security Number (SSN) to start building a credit history. This is usually applied for at the same time as a visa before departing the UK. Social Security cards are issued by the Department of Homeland Security. Most lenders will require a SSN to process any applications for loans, or rental properties. Corporate credit cards that might be issued as part of a work role don’t require an SSN, but they also don’t contribute towards your personal credit history.
Get a credit card arranged as soon as you can. There are some credit card companies that are designed for people with no credit history, such as expatriates, but expect high rates. You can ask your bank for a cash-secured credit card, where credit is based on the amount you can put down as a security deposit – the higher you can provide in cash, the higher your credit limit. Try and use the card regularly, but don’t exceed 50% of your available credit. Pay it off in full every month, and this will start to build a solid credit history.
One thing you might need immediately in the USA is a car. If you can buy one outright or you’re shipping your current car, then your credit history is irrelevant. However, if you’re looking to lease a car, a zero credit score will impact on your options. Luckily, there is such a thing as an international executive lease, which is offered by many, but not all, European car manufacturers. These are programs aimed at foreign residents with no credit history in the USA. The monthly payments do, however, build your credit.
Another essential upon relocation is a mobile phone. Your employer may provide a phone with a business contract. Getting a personal contract can be more difficult. You can, of course, get a prepaid phone, but it can be an extra task to remember to top it up. Some phone companies will enable you to pay a large security deposit without any credit history. As with the car above, the monthly payments can contribute to your credit history going forwards.
Check your credit score on a regular basis (every few months), ideally with each of the three major credit score agencies. This enables you to keep on top of the progress you’ve made as you work towards building a strong credit history.
Building a credit history can be done over time. However, it could be six months before you have an established credit rating, and a year to gain an excellent rating.