Credit history starts anew when you move to U.S.
By Eva Norlyk Smith Ph.D.
March 31, 2014
I recently moved from France to the U.S. I talked to Bank of America, where I have a checking account and debit card, about getting a credit card, and all they will offer me is one that requires me to make a deposit. For $500 deposited, I get only a $500 credit limit. I have had a credit card for more than 10 years in France — it's a Visa, the same kind of card Bank of America is offering me. I have always paid it on time. So, why can't I get a Visa in the United States without putting my money down? It's the same kind of card! This is ridiculous, and I am extremely frustrated. Should I try other banks? –Peter
We live in an increasingly global world, particularly when it comes to the use of credit cards. So why wouldn't the same global practices apply to moving credit records and credit scores between countries?
Unfortunately, your credit history and reports are not transferred when you move from one country to another. If you don't have a credit record in the country you are moving to, you have to start over.
From a consumer point of view, this seems unreasonable. But in terms of logistics, it makes sense. The way credit information is compiled differs from country to country. In some countries, credit information is recorded by credit bureaus run by the government; in others, including the U.S., it is compiled by private companies. The information collected differs from country to country, as do, typically, the banks from which the data are collected, and the forms and standards under which they are collected.
In other words, even if the data were transferable, you wouldn't necessarily be comparing oranges to oranges, so trying to transfer a person's credit history between countries isn't feasible for banks.
Why can't Bank of America issue a new credit card based on the records it has? The large banks deal with tens of thousands of credit card applications a week. They are not set up to transfer customer data between branches in different countries and evaluate individual credit card applications. Because of the volume of applications, they automatize the decision-making process. In the U.S., that process is mainly based on FICO scores. Without a long-term credit record, your FICO score will be low, and it will be harder for you to get approved for credit.
Also, when you relocate, you may be starting from scratch with both your finances and your job, making you a potential credit risk.
It is possible to avoid this issue in the future by keeping a credit card in the U.S. if you head overseas for an extended period of time. You'd have to use the U.S. address of a friend or family member for the address of record; U.S. banks don't keep credit cards open for people with addresses overseas.
So, now that you're here, what can you do? You will have to start building credit from scratch, but you do have a few options that can help you speed up the process. Any of the three tips below will help; if you do all, you will establish a solid credit foundation faster.
1. Apply at another bank. Banks differ in their underwriting standards for credit cards, and some banks, such as Capital One, cater to credit newbies. Apply online for a credit card for people with little or no credit. If you are accepted, it will likely still be with a low credit line, but that is OK — you're just starting out.
2. Work with a local bank or credit union. Local banks and credit unions have less-standardized application procedures, and they are more likely to consider the uniqueness of your situation. Get your hands on the equivalent of a credit report from France, a record of past credit card bills and payments, as well as any records of regular rent (or mortgage) payments, paystubs and savings. Ask the bank you used in France for a reference. The more evidence you can provide that you are not a credit risk, the more likely the bank will work with you to issue a credit card or line of credit in the bank — or both.
3. Get a secured credit card with a high credit limit, ideally, around $3,000. Having two to three credit cards will help your credit score, as will having a high total credit limit between cards. The drawback, of course, is that you will have to put down that much in deposit to secure the line of credit. Deposit what you can.
Having a high total credit limit will help with the credit utilization component of your credit score. Credit utilization, also called the debt-to-credit ratio, accounts for 30 percent of FICO scores. If your credit limit is low, it's easy for this component to skew your score. Ideally, balances should never exceed 30 percent of the credit limit; it's best to keep balances at 10 to 20 percent of the credit limit. That's $50 to $100 for a credit card with a $500 limit, which is difficult to maintain. A secured card with a high limit will help you stay clear of this issue.
The good news is that with a little time and patience, you should be able to grow a solid U.S. credit history within a few years. And within as little as a year, your score might improve enough that credit card issuers court you, and not the other way around.
Got a question for Eva? Send her an email.