For the first time, companies have been set up to transfer people’s credit history across borders.
You probably don’t consider your credit score the most interesting thing about you, but it is an important one. Without a good credit history mortgages, credit cards and personal loans become more difficult or more expensive to get.
In fact, not having a good credit score is a major reason people facing an unexpected expense have to turn to payday loan companies or even loan sharks, which charge such high rates of interest that they often result in people getting more and more in debt.
Poorer people are more likely than rich people to have credit scores banks consider unsuitable. But another group who are frequently affected by this credit problem are migrants. Often, that’s not because they previously defaulted on loans, racked up credit card debt or committed any other of the financial mistakes that result in a bad credit score. Instead, it’s because a credit score built up in one country can’t be accessed in another.
That’s even true of the European Union, which prides free movement of people between its countries as one of its main achievements. For financial companies, no verifiable credit score is seen as rejection-worthy as a bad score, because they have no way of assessing how likely they are to pay the money back.
A few startups are now trying to rectify this problem. When migrants want to prove their credit history, these companies do the legwork of requesting that information from the original country and then sending it to the new bank or financial institution. Banks also benefit, because they can more easily win custom from high-earning migrants.
But the system does nothing to help migrants with a bad or middling credit score get more access to low-interest credit. And if the fee to use the service (which has not yet been disclosed) is too high, only well-off migrants will be able to take advantage of it.
Read our explainer on: the financial system.
