Weird Ways Credit Scores Work Around the World
Sometimes in the U.S. it can feel like we’re chained to our credit scores. And who can blame us? Even small black marks from our more carefree college years follow Americans well into adulthood, where debt to credit ratios can make or break something as serious as a mortgage. But hey, that’s life. Or is it? FICO scores seem distinctly American, but surely everyone else is subject to some equivalent of the financial watchdogging that defines every adult’s life, right?
The short answer is: no. There isn’t a global standard for credit scoring—not by a long shot. Some countries track even more than we do, while other countries track nothing at all. In the global scheme of things, America’s credit scoring is actually pretty moderate. It may not feel that way as Experian, Equifax, and TransUnion are tracking seven to 10 years of your payment histories, debt loads, and the like, but it could be worse: in some places even social taboos, like smoking in public spaces, can tank your credit.
Here’s how credit scores work in seven countries:
Canada’s credit scoring system almost exactly mirrors the FICO model heavily used in the U.S., and for good reason: Canada’s two credit bureaus, Equifax Canada and TransUnion Canada, are running the show. Scores range from 300 to 900, with 650 and up qualifying consumers for loan products. And all the usual stuff is tracked: loans, credit card payments, collection accounts, and inquiries.
The United Kingdom
Credit scoring is also pretty similar in the U.K. Three credit bureaus (including Equifax, again) keep track of everything from timely credit card payments to collection accounts. But the U.K. does consider one unusual factor that may help (or hurt) your score: registering to vote. In the U.K, the electoral record is used for everything from registering voters to storing consumers’ contact information to selecting jurors, and being on it may actually help raise credit scores.
France doesn’t have a credit bureau tracking traditional credit histories. Instead, the nation operates more on a blacklist system. Certain actions like committing fraud or bouncing checks are tracked by the Bank of France, according to Complete France. Only those with a financial license, aka other banks and mortgage lenders, can access the records. Because there’s no nationwide credit worthiness scale, to borrow a large sum, say for a mortgage, you’ll need a bigger down payment. According to French Entrée, you’ll need at least 15 percent down to get approved.
Germany’s main credit bureau, SCHUFA, tracks every consumer, around 70 million people, on a scale of one to 100. Much like the U.S., SCHUFA tracks timely bill payments, collection accounts, and liens. But where the U.S. models mostly leave off, SCHUFA keeps going. For example, in the U.S. rent payments and cellphone bills typically don’t make your credit score—they do in Germany. In fact, SCHUFA has nearly 9,000 “partners”—everything from credit card companies to landline phone providers--contributing data on consumers.
Having some financial missteps, or mistakes, reported on your SCHUFA credit profile can seriously mess up your life. According to OpenSCHUFA, an organization pushing for transparency in the company’s credit scoring system, having a lower score could prevent you from opening a credit card, signing a lease on a new apartment, or even getting internet service at home. One in 10 German consumers have at least one negative entry on their credit report, according to SCHUFA. But the company also considers its tracking algorithms a “trade secret.” Meaning, currently, consumers don’t know how their scores are made up.
In the past, financial lenders had a hard time tracking consumer credit in Mexico and much of the nation’s consumers simply had no credit score at all. But in 2017, Mexico’s largest private credit bureau, Círculo de Crédito, partnered with FICO (yep, that FICO), creating a wide-spanning, central system much like the one in the U.S. Now FICO reports that around 85 percent of Mexico’s consumers will be tracked and measured on things like timely bill payments and outstanding loans.
Until recently, Brazil had long relied on a blacklist-style credit tracking model similar to the one used by France. Banks kept files on consumers who committed certain financial sins, like defaulting on a loan. With a black mark, getting new credit was nearly impossible, but as soon as the balance was paid, the black mark was removed. In 2012, lenders began campaigning to establish records of both positive and negative consumer information, arguing that the blacklist-only method made it harder for borrowers to pay back debt. That led to Brazil’s first credit research agency, which today tracks much of the same data used by the U.S., like credit card payments and unpaid loans.
While most of the credit scoring world seems to be run at least in part by Equifax or TransUnion and is concentrated strictly on a person’s financial behavior, China’s system is … not like that. At all.
In 2014, China unveiled a “social credit system” that tracks not just whether you paid your credit card on time, but also what you bought with that credit card, whether you jaywalked outside the store you bought it from, and pretty much everything else you did in between. Unlike western credit scoring, which only tracks people’s financial behavior, China’s system actually aims to influence social order, punishing and rewarding certain actions in order to pressure people to become model citizens.
For example, smoking in a non-smoking area can ding your score. Other offenses include walking your dog without a leash, flaking on a dinner reservation, spending too much on “frivolous” purchases like video games, and boarding a train without a ticket. On the other hand, behaviors the Chinese government deems “positive”—like on-time bill-payment as well as sorting your recycling, donating blood, and performing charitable works—can increase your score.
And there’s plenty of incentive for Chinese citizens to try to raise their scores—a low rank will cost you more than a high interest rate. Those with poor social credit may be banned from renting hotel rooms or buying travel tickets, hit with throttled internet speeds, and even have their pets confiscated. Business Insider reported that 17 people who refused military service were barred from entering college. Of course, it’s not all bad: high-scorers get perks, like discounted public transport, free gym facilities, and shorter hospital wait times.
The social credit system isn’t fully in place yet; it’s currently active in a piecemeal network of provinces and China expects it to be fully functional by 2020.