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The United States credit scoring system ranges from 300 on the low end (poor) to 850 on the high end (excellent). Your credit score is necessary to borrow money for things such as purchasing a home, financing an automobile, and even getting a credit card. But many people are curious; do other countries have credit scores? And the answer is yes though not all countries agree on the importance of credit scores.
Read on to better understand countries with credit scores and how those countries look at credit scoring systems. This information can help prepare you if you wish to finance a major expense.
Highlights & Key Takeaways
- Different countries use different credit scoring systems.
- If you move abroad, you can transfer some of your credit histories. You may also need to start building your credit from scratch.
- While credit scoring systems may vary worldwide, the habits that build good credit are mostly the same.
- More countries do not use a formal credit scoring system than counties that do
- Paying your bills on time and a healthy income can help you establish credit and creditworthiness in a different country
Credit Scores in Other Countries
A credit score ןn the U.S. works as a prediction of your financial behavior. The higher your credit score, the more likely you will pay the lender back on time, thus fulfilling your financial obligations to them. A low credit score, on the other hand, signals to a lender that you are a greater credit risk and may not be creditworthy.
Like the U.S. has a credit scoring system, so do other countries. And, though some credit reporting agencies have presences in multiple countries, it doesn’t mean your credit score will transfer with you should you move to another country. To that end, there are also financial considerations that you should take under advisement. Moving to a new country means you must adjust and embrace a new currency, not to mention a different credit system. Here is how some other large countries look at credit scores.
Credit Score in Australia
Australia uses a credit system that is not all that different from what you are used to in the U.S. They use four major credit bureaus, two of which you are likely familiar with.
When Australia first started using a credit reporting system, they only reported on negative activity such as missed or late payments. Higher credit scores reflected a lack of negative activity. However, the Australian credit scoring system evolved over time and now uses a range of 0 to 1,000 (or 1,200, depending on the credit reporting agency). A good credit score is generally anything over 625. Credit reports also include up to two years of positive data, providing a better-balanced approach.
The Australian credit system ranks borrowers on a variety of factors, including.
- Repayment history for loans and credit cards
- How much you have borrowed in the past
- Your ability to pay your bills on time
- Any credit limits in place
- Frequency and volume of credit applications made over time
- Any bankruptcies, defaults, or court judgments in your name
Improving your credit score in Australia is much the same as what you need to do in the U.S. Pay your bills on time, dispute errors on your credit report, avoid multiple high-interest debts, etc.
Credit Score in Canada
The credit score range in Canada closely resembles that of the U.S. The range spans from 300 to 900 and is calculated using data from your credit report. You gain points when you use your credit responsibly and lose points when you don’t. Canada uses two credit bureaus, both of which are also used in the U.S.
The Canadian credit scoring system ranks borrowers on factors such as:
- Length of credit history
- Amounts owed
- Payment history
- Credit utilization
- Recent credit applications
- Debts in collection
- Types of credit in use
- Bankruptcy
To improve your credit score in Canada, you should make your payments on time each month, limit the number of credit applications that you make, monitor your credit mix, and use your credit wisely.
Credit Score in Germany
The credit score rating system in Germany looks a bit different than what we are used to. Their range spans from just 0 to 100. And there is only one primary credit bureau in the country.
Though Germans can often get loans without a credit score as loan and credit card terms are laid out to prospective borrowers, most lenders require a credit check. During the Schufa credit check, they will look at the following:
- Bank accounts
- Credit cards and loans
- Existing guarantees
- Accounts with mail-order companies
- Current leases
- Cell phone contracts
- Age and place of residence
If a borrower has an unpaid credit installment, it will reflect poorly in the score. The end goal of the Schufa score is to determine if the borrower will be able to fulfill their financial obligations or if there is a high risk of default. That said, German borrowers start with a score of 100. Provided they make their payments on time and practice responsible borrowing, their score will remain high.
Credit Score in Japan
Japan is unique in that they do not have a single, national credit scoring system. As such, there is no credit score range. However, Japan does have three major credit bureaus.
- Association’s Personal Credit Information Center
- Japan Credit Information Reference Center Corp.
- Credit Information Center Corp.
However, individuals in Japan do not receive credit scores. Instead, banks will determine a borrower’s creditworthiness based on the following:
- Your ability to pay your bills on time
- Keeping your credit cards open after paying them off (instead of closing them)
- Managing a healthy credit mix versus applying for too many forms of credit
- Salary
- Length of employment
- Current debts
Your likelihood of being approved for credit in Japan all depends on your history of responsible borrowing behavior. If you are moving to Japan, however, you should know that credit cards issued by banks are generally prone to strict screening guidelines. It can be difficult for those new to the country to get approved. So, until you have built a history of residence in the country, you may be better served using an international credit card, as many credit, debit, and prepaid international cards like American Express, Visa, and Mastercard are accepted throughout the country.
Credit Score in South Africa
The credit score range in South Africa spans from 300 to 850. And they utilize several credit bureaus to determine the creditworthiness of want-to-be borrowers. Those credit unions are:
The approach to scoring in South Africa is similar to what you see in the U.S. and other countries. They look at:
- Payment history
- Amounts owed
- Types of credit applied for and how many times
- Length of credit history
- Credit utilization
- Bankruptcy
If you want to improve your credit score in South Africa, you should take the following approaches.
- Stay on top of your financial commitments
- Pay your debts on time every month, and when you can, pay more than the minimum monthly amount due
- Keep your credit limits high and the amounts you borrow low - many borrowers could benefit by following a similar approach as in the U.S. by keeping utilization under 30%
- Stay on top of your credit score and credit report
As with the U.S., South Africans are eligible to review their credit report at no charge, once per year. Contact Experian or TransUnion to get a free copy of your report.
Credit Score in the United Kingdom
The credit scoring system in the United Kingdom (encompasses England, Scotland, Wales, and Northern Ireland) spans from 0 to 999, depending on the credit bureau. There are three primary credit bureaus used across the UK.
The bureaus look at the information on your credit report when calculating your score. More specifically, the following data points are a critical component of what goes into your score.
- Address history
- Credit history
- Credit applications
- Public records
- Financial ties
And the best way to improve your credit score in the UK is to do the following:
- Pay your bills on time every month
- Ensure your address is accurate on your credit report
- Break financial ties with anyone who is on a loan or credit card with you that might have a poor credit score
- Avoid applying for new credit immediately after being turned down by another lender
- Stay on top of your credit report to ensure it is accurate
- Register to vote as where you live could boost your credit score
Credit Score in the United States
If you are moving to the U.S., you are probably wondering, how does credit affect your life? And in the U.S., your credit score plays a substantial role in your ability to rent or lease an apartment, buy a home or car, and even open a credit card or take out a personal loan. The credit scoring system in the U.S. spans a range of 300 to 850, with 300 being a poor score and 850 being an excellent and perfect score. The three main credit bureaus are:
Your credit score in the U.S. considers five influential factors, and each of those factors holds a certain weight. For example, your credit score is based on the following.
- Payment history, 35%
- Amounts owed, 30%
- Credit history, 15%
- Credit mix, 10%
- New credit, 10%
If you want to improve your credit score in the U.S., the best things to do are as follows:
- Pay your bills on time every month
- Keep credit card utilization (the amount you owe compared to your credit limit) at 30% or under
- Be mindful when applying for new credit as each time you apply, your credit score can drop by five points, and this activity remains on your credit report for up to two years
- Keep credit cards open after you pay off their balance (this will help with your utilization)
- Have a healthy mix of credit - avoid taking out too many personal loans or credit cards
Taking these steps to improve your credit score will increase your likelihood to be approved for personal loans for good credit or personal loans for excellent credit.
What Happens If You Move
If you move from the U.S. to a different country, you will likely need to establish a credit score from scratch. And though this is challenging, it can be done. You should know, too, that even if you move to another country, it doesn’t erase your credit score in the U.S. nor does it absolve you of any debts that you owe. Therefore, it is important that you fulfill your financial obligations before you move or stay on top of them after. If and when you return to the U.S., your credit history may be complicated by a few-year gap and it may take you some time to rebuild your score. Further, your credit score in a different country does not impact your credit score in the U.S.
What Countries Don’t Use Credit Scores
Many countries don’t use credit scores to determine a borrower’s creditworthiness. The list of countries that do not use credit scores is likely longer than those that do. For example, in France, lenders will look at three months of your bank statements to prove your income. Then, they will analyze to decide if you are creditworthy. So in France, though they do not have an official scoring system which means no, to your question about does income affect your credit score? But, your income will help the country decide if they want to issue you a loan.
The Netherlands, as another example, looks at your income and experience in repaying your financial debts. If you have defaulted on a debt, those defaulted payments are registered at the Bureau Krediet Registratie (BKR), the governing credit registry bureau. If your payments appear on this list, you may not take on new credit until the listing is cleared and your payment obligations have been met.
Brazil followed a very similar approach to The Netherlands for quite some time. Financial institutions and banks looked at negative reporting to decide if you were creditworthy. Once your debts were paid, you looked favorably. However, Brazil has recently introduced a more formalized process to establish creditworthiness.
How Can I Establish Credit in a New Country?
If you move to another country, be sure to practice patience, as you cannot establish credit immediately. Even if you’re just looking for a new job or place to live, having a thin credit profile could cause you to lose that dream apartment, at least for awhile. Having some cash for a downpayment or deposit can help ensure that you can rent or lease after you arrive in a new country and while you work to build your creditworthiness from the lens of the new country.
In the meantime, here are other things you can do to help establish a credit history in a new-to-you country.
- Open a local bank account
- Apply for a secured credit card and use it responsibly
- Apply for a mobile phone from the new country and make your payments on time
Over time, you will build a credit history, and borrowing money in a different country will become easier.
Final Word
When you started reading this article, you were trying to answer the question; do other countries have credit scores? And as you can see, the approach to credit scoring can vary from country to country. Some countries such as The Netherlands and France don’t use a scoring system at all and look at your income and place of residence to decide if you are creditworthy. Other countries such as the United Kingdom, Australia, and Germany have credit scoring models but they are calculated a bit differently than inthe U.S. Before making a move to another country, understand their guidelines and approach to credit.
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