Editorial Policy

How to build credit after living abroad

Erica Sandberg

May 27, 2014

QDear Erica,

I have dual citizenship in the U.S. and the United Kingdom. I studied in the U.S. for about four years until 2002. Since then, I have been living in the U.K. I am now considering returning to the States.

I think my credit was good when I lived in the U.S., but will that help me now? If not, what should I do to build up a better credit rating? Eventually, I'd like to sell my mortgaged flat in the U.K. and buy in the U.S. –Julia

ADear Julia,

Thanks to the global nature of the Internet, you can obtain copies of your consumer credit reports from any location on the map, at any time of the day or night. Go to annualcreditreport.com, and obtain reports for the three major credit reporting agencies (TransUnion, Equifax and Experian) for free.

But before heading over to that website, a warning: You may be disappointed after viewing your reports. They may not be horrible, but they might not be wonderful, either.Ask Erica

You likely don't have active U.S. cards, so your trade line section — which is the most important part of a report, as it houses a detailed record of your borrowing and repaying history — will probably be blank.

The reason for such emptiness? Businesses that subscribe to the credit bureaus don't report most data forever. Evidence of cards that you managed perfectly will have dropped off your reports after 10 years of dormancy. The upside is creditors can only add negative information to your reports, such as late payments and defaults, for up to seven years, so they would be gone from your file by now, too.

Since you want to buy a home with a mortgage, you will need a credit report that indicates a long, but recent, history of dealing with loans and lines of credit. You'll need a high credit score, and those numbers are based on the activity gleaned from the report itself. Most banks and credit unions rely on these scores to make sound lending decisions.

As with most money and credit predicaments, however, you can fix your lack of history and scores by taking action. When you get to these shores, apply for a credit card and start charging again. Your dual citizenship will come in handy, as it can be difficult to get a card here unless you have a tax ID number.

I suggest trying for a secured credit card, since most issuers don't require the same varied and lengthy credit history for those as they would with an unsecured product. A job and cash to put down in a deposit account — just a few hundred dollars — will usually be sufficient to qualify for a small credit line.

Be consistent in your purchases. Buy one thing every month with it, and pay on time and in full. In as little as a year, you'll establish a decent score. Then you can add another card and increase your score further.

With a report brimming with beautiful borrowing, you'll be in a fine position to appeal to a mortgage lender.

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