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How Credit Scores Work In 8 Countries Around The World

Credit scores can be tricky to get your head around at the best of times. And, for good reason – they’re a complicated thing to work out! But, the confusion around credit scores probably isn’t helped by the amount of questionable information that’s out there. From the myths we’ve all fallen for to information that sounds about right, but turns out to be from other countries with different rules… it’s a minefield!

So, to help set the record straight, we’re taking a look at how different countries around the world do credit scores. See how systems from all sorts of countries compare to ours in the UK, and learn the differences so you can spot if something you’re reading isn’t applicable to you!

But first, remember…

The credit score you have only applies to the country you’re in. Credit reference agencies around the world don’t share information between one another. So, this means that if you live in the UK, the credit report you get from one of our credit reference agencies will only include information about your credit history in the UK. If you’ve moved here from another country, or if you decide to move abroad, you’ll more than likely be starting over from scratch!

How credit scores work in the UK

Let’s start at home, with how the UK’s credit scoring system works. The UK has three main credit reference agencies: Equifax (who we work with at CredAbility), Experian and TransUnion. Each credit reference agency has their own, individual system for working out your credit score. Experian uses a scale of 0 to 999, Equifax scores you from 0-700, and TransUnion has both a 1-5 rating system and a scoring system, which scores you out of 710. Any other credit score tools you find (like CredAbility) will be using information that comes from one of these three and will usually give you one of these three scores. But, lenders will always work out their own score for you, rather than use a credit reference agency’s score, to reflect their unique acceptance criteria. So, we always suggest taking your score as a general impression, rather than as something that’s written in stone.

Depending on which of the credit reference agencies you check your credit score with, you could end up with three completely different scores. But, they should all have the same meaning – for example, if you have a “good” score with Equifax, the scores you have with Experian and TransUnion should also qualify as “good” in their systems. We’ve written a guide that makes it easy to compare – read it here.

Some of the factors that affect your credit score in the UK include the amount of money you owe, your payment history (including how long you’ve had your accounts), whether you have records of court judgements like CCJs, bankruptcy or IVAs in your file, the number of hard searches that have been carried out on you, and your electoral roll information.

The USA

The USA’s credit scoring system is perhaps the most similar to the UK’s in terms of what information goes into making up your score. Also like the UK, the US has three credit referencing agencies – known as credit bureaus – and they’re still Equifax, Experian and TransUnion. But, the way credit scores are calculated is very different.

In the USA, the majority of the time your credit score is calculated using a scoring system called FICO, which gives you a score from 300 to 850. A FICO score, like a UK credit score, is based on the information in your credit file. Also like the UK, you can end up with a slightly different credit score depending on which bureau you check your file with. Different credit bureaus may have slightly different information about you, and so running each bureau’s data through the FICO scoring model may result in slightly different scores.

In the US – and this is where they’re different to the UK - the majority of lenders use the FICO scoring model as well, rather than working out their own unique score for you when assessing applications you make to them. So, in the US, the credit score you see is also more than likely the score you’d get from a lender you applied to, too.

The USA also has a credit scoring model called VantageScore. It’s very similar to the FICO score model, using the same sort of information to work out your score, which is also out of 850. But, VantageScore isn’t as popular or widely used as the FICO scoring model.

Anything you read that mentions a FICO score or VantageScore is talking about the American system, and it doesn’t apply to the UK.

Germany

The credit scoring system in Germany is very different to the UK. In Germany, the main credit referencing agency is called SCHUFA, who hold the same sort of information as credit reference agencies in the UK and the USA – about your accounts, how much you’ve borrowed, fines you’ve received, and so on. And, the information in your credit file is used in more or less the same way – to decide if you are creditworthy when applying to get a phone contract, rent an apartment, or get a credit card.

But the way your credit score is calculated in Germany is completely different to the UK or the USA. In Germany, everyone starts with a score of 100 – the highest your score can be – and it drops over time depending on the type of credit history you build. A score in the 90s is considered good in Germany. This is the opposite of the UK system, where if you’ve never used credit before, you can expect to receive a low score that gets higher as you build up a positive credit history over time.

France

France is another country that has a very different system for determining creditworthiness, and their system doesn’t give you a credit score at all!

In France, only negative information – about whether you’ve committed fraud, missed payments towards your financial commitments, have been declared bankrupt, and so on – is kept on file. The information is held by the Bank of France and can only be accessed by other financial institutions who have a special license that’s granted by the Bank of France.

But, what if you don’t have any negative information filed? French banks and lenders might be able to see that you’re not a particularly bad person to lend to, but how do they check that you are – in their eyes – a good person to give a credit card or loan to? It’s simple. In France, when you apply for credit, you’ll typically submit 3 months’ worth of bank statements and the same number of payslips along with your application and the bank or lender will analyse the information to decide whether or not to lend to you.

China

In China, rather than a system that solely determines your financial creditworthiness, they operate a social credit system that was launched in 2014 and has been rolled out gradually over the last few years. The social credit system assesses how trustworthy you are on the whole, not just with money.

As well as your financial information, your Chinese social credit score also accounts for infractions like traffic violations, your criminal record, and antisocial behaviour, none of which is included in UK credit reports. The Chinese government is also reportedly experimenting with using data collected via video surveillance in social credit score calculations – after all, just because you haven’t been caught doesn’t mean you’re not up to no good!

Like some other countries, the social credit score system only adds up negative information about you, with each entry contributing to your overall score. What can count against you varies according to local government policy. For example, in Beijing, eating on public transport can result in a negative marker on your social credit file, and in Suzhou, cheating in online video games can count against you!

Having a low score can stop you from doing more than accessing credit cards and loans; it could also stop you from buying train or plane tickets, prohibit you from being employed in certain jobs, for example in a bank, and could even affect who you match with on Chinese online dating sites. In some places, mugshots of individuals with bad social credit scores are displayed publicly on LED billboards, or are shown before a movie at cinemas. Meanwhile, a good social credit score can get you preferential treatment like discounted tickets for public transport, and quicker access to healthcare.

The Netherlands

In The Netherlands, credit report information is tracked by the Bureau Krediet Registratie (BKR). Any time you borrow more than €250 for longer than a month, a record of the loan or credit will be recorded in your file with the BKR. There are some exceptions to this, though – for example, a mortgage you have for your own home would not be included in a BKR credit overview.

When lenders report to the BKR, they register both positive and negative information about you and your accounts. But, it seems to us that, aside from informing the BKR that you have an account with them, most of the information that Dutch credit providers share with the BKR is negative, for example when you fall behind on payments. Once a negative mark is registered on your file, it’ll stay there for five years.

The Dutch credit report system works quite a bit like the French system, and having good credit simply means there aren’t any negative records in your file!

India

India’s credit score and report system is quite similar to the UK’s, but not exactly the same. In India, you can get your credit score and report from CIBIL, who are part of TransUnion, Experian, Equifax, or CRIF Highmark. Each of them collect information about you like your personal details, contact information, information about your accounts, and enquiries or searches made on your credit file. In India, though, your employment information is also part of your credit report, which is different to the UK. Banks and financial institutions provide your monthly or annual income details to credit reference agencies.

Like the UK, the different Indian credit reference agencies all work out your score for themselves, according to their algorithms and calculations. This means you could get a different score from each of them, but they all use the same scale, so your credit score in India will be between 300 and 900.

Australia

Until relatively recently, Australia operated the same kind of credit scoring system as many other countries around the world. They’d record negative information about you like missed payments or being declared bankrupt, but not positive information like making your payments on time, keeping your credit usage low, and so on. Now, though, that’s all changed, and the Australian credit scoring system probably the most similar to the UK’s of anywhere in the world.

An Australian credit report now includes all the types of things you’re probably used to seeing in your UK credit report. It includes personal details that identify you, information about your “liabilities” – the accounts you have, your monthly repayment history, information about overdue accounts, and searches or “enquiries” that have been made on your file. In Australia, these enquiries are split into commercial credit enquiries – the equivalent of hard searches in the UK – and file access enquiries, which are the equivalent of soft searches. It also includes information that’s a matter of public record, like court judgements, bankruptcy and insolvencies and directorship and proprietorship details. The last two are different to the UK, where details of your director or proprietorships are not included in your credit report.

Like in the UK, the information in your credit report is then analysed to give you your credit score. In Australia, that’s a number out of 1200 with Equifax, 1,000 with Experian, and 1,000 with Illion, whose consumer credit score service is called Credit Simple. And, also like the UK, lenders can apply their own criteria and scoring models to your credit report information, so may not use the credit score provided by a credit reference agency when reviewing your application.

Brazil

For a long time, Brazil didn’t have a formal credit reporting or scoring system, and like many countries around the world, relied on negative reporting of missed payments rather than getting an overall view of all the accounts a person has, not just the ones they’ve fallen behind on.

Nowadays the credit scoring and reporting system used in Brazil is very similar to the UK’s. Lenders can report both positive and negative information about an individual and their payment habits, and credit scores are worked out by credit reference agencies based on the information provided to them. There are three main credit bureaus in Brazil: Serasa Experian, Boa Vista SCPC, and SPC Brasil. Each credit bureau uses their own calculation to work out an individual’s credit score as a number ranging from 0 to 1000, but like other countries, a Brazilian credit score is based on the information in your credit report.

 

Which country do you think has the best system?