Katie Schenk - January 09, 2018
Think about it for a second; you wouldn’t loan money to someone you didn’t know – or didn’t know anything about, would you? Financial institutions feel the same way.
And, since we’ve moved well past the days when community banks considered the personal reputation of a borrower who’s banked with them since the beginning of their financial history, we need another way to determine the financial reliability of borrowers.
That’s precisely the motivation behind credit reports. And, to secure a loan of any kind from just about any source, you’ll need to get your hands on yours.
In some countries, such as the United States or the United Kingdom, credit reports are part of life; citizens and permanent residents know what they are and what to expect (though not everyone is up-to-date with the intricacies of their personal ratings).
Universally, however, credit reports aren’t the norm. In some countries, credit reporting is decentralised to such a point that lenders usually undertake forensic investigations to determine whether an applicant is worthy of credit.
If you’re considering grad-level education and need additional financing, you’ve probably run across several sources advising you to check (and clean) your credit report. But if it’s not part and parcel of your financial life, it’s easy to become confused about why you need a credit report, what it is, and where to get your hands on one.
But, it’s not always easy for everyone.
Simply put, a credit report – anywhere in the world – is a detailed history of your financial life.
Your credit report is a reflection of your financial health, but the information you would see on an American credit report isn’t the same as you would find on a similar document in Australia, India, Singapore, or France.
Information is collected from your accounts regarding your payment history against credit you’ve previously received.
Your utilities and rent payments might be included in some countries, while in others, they may only reflect on your credit report if you’ve fallen behind on payments. Some countries include monthly accounts – as you might find with mobile phone providers – within your credit reports, even if you’re billed before service.
As every country’s banking system developed, national credit reporting norms grew up around them. In France, for example, there’s a history of reporting only the negative aspects of a person’s credit. You find similar practices in Portugal and Spain. This was previously the case in Australia, for example, though recent legislation is transforming the reports.
In some countries governed by Islamic principles lending presents hurdles that have prevented the development of a robust credit reporting system. In the United Arab Emirates, the first credit reporting bureau, Al Etihad, was only established in 2012 – and the first reports were only available online in 2015.
In contrast, Singapore and Hong Kong have credit reporting systems that surpass those found in the United States and the United Kingdom.
As you would expect, it’s a little more time-consuming to obtain your credit report in a few heavily bureaucratic countries. In countries like China and Russia, it’s best to get started as early as you can to avoid processing delays – especially if you are at all eligible or considering an international loan.
It’s not just what’s on your credit report or the development of credit agencies that differ either; different countries require you to apply for these reports through diverse agencies. In the US, for example, there are plenty independent credit reporting agencies. In the UAE, the new bureau falls under the auspices of the government. In Brazil, you’ll find a variety of private and public reporting agencies.
And, while it’s hardly universal, there are countries that regulate free access to personal credit reports by stipulating that individuals receive a free report annually. (Keep in mind that you usually need to request this document; credit reporting agencies have no idea when you have the headspace to deal with your financial well being.)
You can find links to several reporting agencies in a variety of countries in the Prodigy Finance FAQ pages. (Updates will be made occasionally, so feel free to check back or reach out to email@example.com if you’re stills stuck.)
While the report holds all the detail, the single most important aspect is often the credit score – except in countries, like France, where a single bounced payment may prohibit you from receiving additional credit until the account in question is settled in full.
Credit scores are usually expressed as a number on a scale that demonstrates your creditworthiness. The scale varies between countries and sometimes between the credit bureau responsible for data collection.
In the US, your FICO score ranges on a scale between 300 and 850, where anything over 720 is considered excellent. All three credit bureaus develop a credit score on this scale based on the information they have regarding your financial life. And, there is a clear formula for determining the score based on payment history, debt ratio, length of credit history, types of credit, and hard credit enquires (those requested by potential creditors).
By contrast, in the UK, which also has three credit reporting agencies, you can expect a different scale depending on the bureau. Experian scores range between zero and 999 (with 881 used as the base for exceptional), while Equifax’s scale only goes up to 710 (467 is the excellence cut-off), and Callcredit simply rates individuals between one and five – with five being the best. Regardless of the scale used, scores are based on electoral roll information, court records, hard credit enquiries, and reported account information.
And, the differences between countries don’t end there. In some places, you can expect negative information to remain on your report for well over a decade, whereas it only lasts for seven years in the US (the exception are bankruptcies which remain on file for 10 years).
We’re sorry to say, but the wonderful credit score you built up in your home country doesn’t transfer across international borders. Just because Canada and the United States share a border, they don’t share credit reporting standards.
That’s true even though you’ll find key independent reporting agencies, such as Equifax and TransUnion, operate in both countries. Indeed, you’ll discover that these companies, along with Experian, provide credit reports in dozens of countries.
If you’ve never had to obtain a credit report in the past, you’ll want to see if any of these three companies operate in your country before investigating other options; they truly understand credit reporting, customer service, and country regulations.
But, they still can’t transfer your credit rating from one country to another because every country, as we’ve seen, has different reporting standards.
That’s precisely why it’s almost impossible to secure a loan in a host country as an international student; the banks have no way of discerning your financial well-being even if they have access to your credit report. Banks need to judge apples against apples and can’t deal with oranges.
If you’re hoping to remain in your country of study for a few years after graduation, you’ll want to build and establish credit where and how you can during your studies. But, you don’t want to avoid using credit cards in your home country while you’re away; as the lack of traction on your accounts usually leads to lower credit ratings. While it’s not always the case (depending on the credit reporting system), financial reporting is moving in that direction.
If you’re investigating a loan from a bank or financial institution in your home country, you may not need to obtain a credit report; your bank is likely to handle that directly. However, if you’re obtaining a loan from an institution in your host country, you will need to obtain a credit report, and there may be stipulation regarding the time frame.
The borderless lending model developed by Prodigy Finance enables financing and tracking across supported countries, which makes credit reports crucial for determining loan viability. As such, credit reports are required documents for Prodigy Finance borrowers. You will need to upload a copy of your credit report after receiving and accepting your provisional offer. It’s not the only document that’s needed, of course, but it’s impossible to proceed to the next step without it.
Prodigy Finance assesses credit reports based on norms established by the country of origin – not according to the standards of the country of study.
With the disruption of fintech companies, it's possible that traditional credit reporting standards may change over time. Millennials are forcing banks and other financial service providers to consider new forms of assessment that more accurately reflect the realities of their lives - and, of course, some developing systems may be able to adapt to these norms more rapidly than others.
In the meantime, credit reports remain a central tenant to any financial risk assessment. And, even though Prodigy Finance has a strong community component, it's still an international lender and requires a credit report to perform accurate reviews. You wouldn’t provide a loan to a stranger either; would you?
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