In the United States of America, we are all aware of credit scores and how the same affects our economic standing and ability to loan money, to the point that many Americans turn to credit repair if their score drops too low. But a pertinent question that arises is – what if we move outside of the United States? Are credit scores still relevant? The answer to this question is both yes and no.

Lending is, after all, an important component of any economy irrespective of where you are. Whether we are discussing an individual or a business, lending or credit is sought in all economies today. If it is a consumer, he or she may seek a consumer loan to buy a product, payment of which will be made directly or indirectly from his or her next series of pay slips. For businesses, they may seek short-term loans to pay their current debts that may be repaid over a year or so as the business makes a profit from their ongoing entrepreneurial endeavors. It is natural that those providing loans want to check the past financial history of the consumer or business seeking a loan.

Europe

Equifax is the credit bureau functional in 15 European and Latin American nations. Subject to existing legal frameworks, the parameters for reporting a credit score vary from nation to nation. Each country has its own ways of determining the credit score range and assignment of scores to an individual or business based on a number of variables depending upon the existing regulations and financial reporting norms.

Credit scoring differs by country to country in Europe. On the whole, each application for a loan is assessed based on a number of variables including their present salary, family status, current liabilities, and residential status.

The common theme is that if you do not pay your debts in time, you are assigned a special file that is tracked by all of the lenders across most of Europe, thereby creating hurdles in getting any more loans. This is not good news for fugitives and economic offenders who earlier thought that changing their citizenship or zone of business would keep them run away from paying the loans.

Today, thanks to advances in Information Technology (IT) and close cooperation between countries across the continents because of increased globalization, the credit scoring of one country is more and more relevant outside of the country.

United Kingdom

There are three credit reference agencies in the United Kingdom. An interesting feature unique to the UK is that court rulings, and whether an individual seeking a loan voted in elections or not, are also taken into account. This is something that is not factored perhaps in any other country be it the United States of America, Canada, or elsewhere.

Canada

The basic need when it comes to the computation of credit score remains the same – lenders in Canada will be still looking at your past borrowing history, taking into consideration if you have made timely payments of your debts or defaulted. Based on your past borrowing history, a credit score will be assigned. The rules determining the credit score of the two credit bureaus in Canada base this credit score on a range of 300 to 900, and they are almost the same with that of the United States of America where the range is low 300s to 850 from three credit bureaus.

Latin America

An exception to the importance of credit scoring is Latin America. Being mainly a cash economy, credit is not of that much importance here. However, some United States-based firms in Mexico do provide mortgage financing on foreign properties, and for them, your credit score in the USA does count. Only a limited number of expats in Latin America use loans as a means for significant buying. The reason perhaps is that the cost of living is not that high compared to the United States, Canada or most European nations. Therefore, the motivation to conduct overseas shopping is rare, which is one of the advantages of living abroad.

In Latin America, it is more difficult to get mortgage financing than in the United States, and if you do avail financing in the form of a mortgage, the rate of interest is generally much higher than the U.S. where the norm is six to ten percent. In addition, you are almost out of luck availing a fixed rate deal, as the same is difficult to bargain.

As the world becomes more homogenized, we find that the methods to define creditworthiness are growing more similar while becoming more sophisticated.