While living abroad, your credit score back in the US is probably one of the last things on your mind. But it’s important to protect, otherwise if you do ever move home you’ll be starting from scratch, and a low or damaged score could prevent you from qualifying for a mortgage or car loan, among other things. Luckily, a credit score is fairly easy to maintain with just a few steps.
Keep your credit cards active
Though you might join a new bank and receive a new credit card in the country you’re living in, you should keep at least one of your old credit cards active. The length of your credit history is an important factor in your score, and lenders like to look back on a long history of on-time payments. Keep a credit card open with an American bank, make a few small purchases a year, and pay them off right away to keep your credit score stable.
No credit? Apply for a secured credit card
If you’re moving abroad with little or no credit history, don’t let the move delay you from building one. Apply for a secured credit card, where you deposit a set amount in a secured account, which then secures a line of credit up to that amount. Now you can use your credit card like any other, and if you’re making payments on time, you can eventually shift to an unsecured card and build your credit from there.
Another solution to start building a credit score is using services like Self Lender. This service give you the opportunity to save some money in a short-term deposit (i.e. a small short-term loan) that you sell to yourself while enhancing your credit score at the same time.
Protect your identity
Moving abroad can put you at risk for identity theft, because Fatca requires you to give over foreign bank account reporting forms including bank account numbers, names, birth dates, and social security numbers, as well as your signature. While US-based institutions are subject to strict data protection standards, foreign financial institutions are not, and as a consumer you aren’t entitled to the same legal protections that you are in the US. American taxpayers with foreign financial accounts have to keep their US social security numbers on file under Fatca, so that the foreign bank can report information to the IRS. For this reason, you should always use a credit monitoring service like LifeLock, Experian, or Identity Guard, so you can immediately see any activity in your credit file. With a monitoring service, you will be alerted to changes and can stay proactive in stopping any impersonations. It’s also a good idea to keep your electronic tax returns on file to prove your compliance both to US and foreign banks.
One of the most effective ways to prevent identity theft is to freeze your credit. However, this is only recommended if you know for sure you will not need a new line of credit or are not planning to move back to the US.
Moving abroad is exciting, and opening a foreign bank account is useful and necessary in many ways. Still, keeping up a credit score in the US is important and easy, and something you’ll be glad you did when you eventually return home.
For a satirical view on the credit score system, you can watch John Oliver's episode on credit reports here.
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