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If you are an expat and there’s a chance you will return to the US, here are some steps for securing your credit rating. Maintaining a solid credit history while living overseas will make your life easier upon your return. Trying to re-establish yourself in the US with an old or no credit history, especially after a long absence, can be a major inconvenience, even if you have considerable savings and income.
Use Your US Credit Cards: While living overseas, all of your traditional US-based lines of credit that remain open will continue to affect your credit score, such as your credit cards, mortgages, student loans, utility bills and cell phone contracts. So, make sure you pay your bills on time. One of the easiest ways to maintain your existing US credit rating, especially if you will not own a house or have other debt overseas, is by using your US credit cards. I recommend having at least two and paying them off in full each month. Several major credit card companies such as Capital One and American Express offer credit cards with no foreign transaction fees if you want to use your US card overseas. However, check with your card issuer to find out if they will allow you to keep your credit card if you have a foreign address. Several on-line retail websites in the US will only accept US-based credit cards, although they will often ship overseas. It is much easier to get a US credit card while living in the US. Some overseas Americans have had luck applying for financial accounts, including a US credit card through the State Department Federal Credit Union.
Consider Applying for a Secured Credit Card: If you have never had a credit history in the US and find that you need to start building one, this can be a challenge. The credit card industry has recognized this challenge and if you are patient, you can start out by applying for a secured credit card. Essentially, you deposit a set amount — say, $1,000 — in a secured, blocked account and this money is used to secure a credit line of $1,000. You can use your secured credit card like any other credit card and if you regularly pay your bills on time, after a periodic review (usually at least 6 to 12 months), you may qualify to move to an unsecured card. Then, you will be well on your way to being able to apply for a second credit card and as long as you use your card responsibly, you will be building up your US credit score.
Take Steps to Avoid Identity Theft: While overseas, you will want to remain vigilant about protecting your credit score and avoiding identity theft, which is a crime without borders. American expats have long been victims of ID theft (like their countrymen at home) and are increasingly concerned about how much private information they have to give over to non-US financial institutions and the IRS due to FATCA and specifically the form FinCEN 114 (formerly the Foreign Bank Account Report, or FBAR) reporting requirements. A US tax return and foreign bank account reporting forms for an overseas American often contain the family’s social security numbers, birth dates, during the year, and even the taxpayer’s signature. This is the jackpot for an identity thief or fraudster. It’s nearly everything they need to steal money from existing accounts, establish a false identity, file a fraudulent tax return or open a line of credit.
Foreign Financial Institutions are often not subject to the same data protection standards as US institutions. Their staff may be unaware of the sensitivity of all of this US-based data, and consumers don’t have the same legal recourse as they do in the US. Under FATCA, US taxpayers with foreign financial accounts — even if they live in that foreign country — have to keep their US social security numbers on file so the foreign institution can annually report income and account information to the IRS directly or indirectly. Many foreign banks have also required US persons (citizens, green card holders, some others) to provide copies of past US tax returns which are also kept on file at the bank.
3-1/2. Here’s a related tip: When moving abroad, it’s worth keeping several years worth of electronic tax returns in case you need to prove your tax compliance not only to the IRS but also foreign banks, investment managers, future creditors or business partners.Consider Using a Credit Monitoring Service: American expats should strongly consider using a credit monitoring service in the US offered by firms such as Identity Guard, LifeLock, Experian and TransUnion. Credit monitoring services can keep you apprised of activity in your credit file, especially in the case of identity theft and the opening of new accounts using your ID. Email account hijacking is another big data security gap where thieves impersonate the account holder and try to get financial firms to send money to their own accounts.
Keep a US Mobile Phone Number: If you have not already initiated two-factor authentication with your mobile phone, this is a necessity and may be a good reason to keep a US cell phone number when moving overseas temporarily. Keeping a mobile phone contract and paying the bills on time will add to a positive credit rating and using two-factor authentication will help to keep your email more secure and lessen the likelihood of having your email account compromised and your identity stolen.
Consider a Credit Freeze: If you are overseas and are certain that you will not need a new line of credit, you may consider a credit freeze, which is one of the most effective ways to combat identity theft. The Federal Trade Commission is an excellent resource in explaining the details of how to freeze your credit and what the implications may be. If you are an unfortunate victim of identity theft, whether living in the US or abroad, the Federal Reserve can point you in the right direction on how to recover.