Everyone knows that a person's credit score can have a big impact on the quality of his life. Unfortunately, understanding your credit score, including all of the factors that go into determining it and what can impact it, can be difficult and complicated. And the confusion is only exacerbated when people are relocating abroad and realize that their credit score cannot relocate with them.
American Credit Score
While banks, credit companies and other financial institutions are generally mum regarding the precise measures used to determine a person's overall credit score, there are generally five separate critical factors that are taken into consideration. These factors are repayment history, outstanding debt, length of credit history, state of financial accounts and the different types of credit you have had. Each one of these factors has a predetermined weight on your overall credit score, and in order to keep your credit at an optimum level, it is imperative that proper attention be paid to them. Generally, a person's repayment history has the greatest impact on her credit score, so it is most important that people make their payments on time to keep their credit scores high. Any payment that is more than 30 days late may reflect negatively on your credit score.
European Credit Score
The single biggest thing that Americans relocating to European countries should keep in mind is that their American credit score is not transferable. You will essentially start life in Europe with a clean slate. Additionally, credit scores do not transfer from one European country to another, so if you move, you will have to rebuild your credit every time. Your credit score in Europe will be factored similarly to your American credit score, with such factors as derogatory items, public records, late payments and revolving and installment credit accounts. This means that in Europe, as in America, in order to maintain good credit standing and a high credit score, it is necessary to have a satisfactory repayment history and debt-to-income ratio. While each country's specific credit reporting and collecting practices are different, it is always a good idea to do your best to keep your accounts in good standing.
What You Can Do
The primary reason that credit scores are not global has to do with protecting consumer privacy. This means that not only does your American credit score not count in Europe, it cannot even be retrieved by lenders there. If you are relocating to Europe, it may be in your best interest to maintain a hard copy of your American credit report and score. Additionally, you may want to retain your American credit cards and credit lines until you secure new credit lines in Europe.
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