If you've ever wondered “do other countries have credit scores?" the answer is yes, other countries besides the United States have credit scores. Assessments of creditworthiness, however, can differ across the globe, and you may be surprised how someone's creditworthiness is determined. Let's take a look.
How does credit scoring work in the U.S.?
In the U.S., a credit score tracks a person's financial information, including debt and payment history. This three-digit number represents a snippet of your credit history and is used by lenders to help determine how likely you are to repay a loan in the future. Lenders will then report your payment history, both positive and negative, to one of the three major credit bureaus (Experian®, Equifax® or TransUnion®). Credit scoring companies like FICO® or VantageScore® will take this data and generate a three-digit numerical score.
When you apply for credit, your credit score is used by lenders to gauge your individual creditworthiness. If you've been responsible with assigned credit, you're less likely to be seen as someone who may default on a credit card or loan. If you have a poor credit score, though, you may seem like more of a risk.
What countries have credit scores?
The U.S., however, isn't the only country that has a credit scoring system. Here's how some other countries around the globe measure credit:
When it comes to credit scoring systems, Canada is similar to the United States. Canada uses two of the major credit bureaus, Equifax and TransUnion, to determine someone's credit score. Like the U.S., Canada's credit score tracking is determined by factors including:
- Payment history
- Credit balances
- Credit limits
- Recently opened accounts or applications
- Credit history
- Credit mix
- Total number of accounts
In Germany, each person starts with a universal score of 100 points, which lowers as the consumer borrows money. Germany has its own major credit bureau, known as SCHUFA. Their credit bureau tracks consumer credit data including borrowing activity, balances and payments, to generate a score. The score determines what kind of loans and credit you're approved for and at what terms.
In Japan, there's no formal nationwide credit system. A person's creditworthiness is typically determined by each bank, based on its relationship with the consumer. Each financial institution will look at factors like salary, length of employment and current debts to determine their level of risk as a borrower.
Spain focuses on credit history, but they don't use credit scores. The country has a credit register called the Risk Management Centre (CIR). The CIR tracks all credit and loan activity from financial institutions. Instead of focusing on a mix of both positive and negative items, the focus in Spain is on negative items. Credit files track any negative marks and blacklist consumers when they have negative items on their reports. Consumers can stay on the blacklist for up to six years, or until the debt is paid off.
Australia uses credit scores and has four major credit bureaus: Experian, Equifax, Dun and Bradstreet® and the Tasmanian Collection Service®. Originally, Australia's credit reports only listed negative items, such as missed and late payments. An individual might have a higher credit score based on how “empty" their credit report was. In short, fewer remarks typically correlated with a higher credit score. Now that the process is updated, reports may now include up to two years of positive financial data, making it similar to the current American system.
Does your credit score follow you to another country?
Typically, a credit score is only applicable within its respective country. If you decide to move to another country, you'll likely need to build a new credit score. Your credit score in the U.S., for example, probably won't affect your score when establishing credit in Germany.
In short, many other countries have credit scores. Some are similar to the U.S. model, while others are unique.