Moving to a new country is exciting. There are new relationships to build, places to explore, and much to do to establish yourself in a new land. Among all the challenges, there is one which is fundamental to your new life but its ramifications are not obvious. This is your credit score.
Credit history is a record of the payments you make on loans. It could be loans taken on credit cards or for mortgages. It’s a reflection of your financial health. The institution that issues you a credit card or a loan effectively takes a chance in giving you the funds to affect a purchase. In return you make a commitment to pay back the institution in full or in part, on a schedule. Over time your credit history builds up – with a record of your loans and payment behavior. Some companies, like Transunion and Equifax in North America, consolidate your credit history into a score that reflects your rating. This information can be made available to financial institutions or individuals permitted by you.
Despite having good financial health in your native country, the banks in your new country do not have access to your credit profile.
Your credit scores would typically be used when applying for the following:
The individual or entity assessing your application would request access to your credit score. A low credit score on the application may result in a denial. Alternately you may be offered terms that are restrictive (pre-payment) or at high interest rates.
The difference in interest rates for two individuals with credit scores 660 vs 600 is over 1%. The person with the lower score pays about $1000/year more for a $100K loan. Over a 30 year term this a substantial $30K difference. [Data via myFico]. Tips for building a good credit history
A strong credit profile reflects the risk of you defaulting on loans. So it’s important to show you are financially competent. Here are a few tips.