Relocation – Local credit & car buying
The relocation process can be very overwhelming, as there are many different variables to consider. A recent study indicates that car-buying and leasing ranks among the bottom on the list of priorities prior to relocation, and becomes one of the top concerns for Expats after relocation. Many Expats may not realize that they will need a vehicle, or the obstacles they will face trying to obtain one after they arrive in their new country.
In the United States, most Expats will need a vehicle, most of the population does not have access to public transportation. Looking at the U.S. as a whole, 220 million adults spend an average of an hour-and-a-half in their vehicle each day, and drive about 13,000 miles per year. Having a vehicle offers mobility, Expats can not only get to and from work, but it also helps to accomplish everyday tasks, such as taking the kids to school, going to the bank, or picking up groceries. The average household in the United States owns two vehicles and one in four own three or more.
Upon arrival in the United States, the number one obstacle an Expat will encounter is the lack of a local credit history. Credit does not transfer from country-to-country, therefore, an incoming Expat will start out with a credit score of zero. Approximately 90% of lenders, such as banks use credit scores to evaluate the potential risk posed by lending money to consumers.
The most common model for credit scores in the United States is called the FICO score. This model is based on consumer credit files of the three national credit bureaus: Experian, Equifax, and TransUnion. It is used by the majority of banks and credit guarantors. A person’s credit score represents the likelihood that they will pay their debts. FICO has released some information regarding the makeup of a person’s credit score however the exact formula is confidential. FICO disclosed the following component breakdown: 35% payment history, 30% amounts owed, 15% length of credit history, 10% types of credit used, and 10% recent searches for new credit.
It is extremely difficult for Expats to secure credit on their own, as many companies will often deny Expats completely, or inflate interest rates and premiums due to the increased lender risk. With limited options available, and globalization on the rise, it is important for Expats to know they have options. Obtaining an auto loan is one of the best ways to start building a local credit history and will help pave the way for other solutions that are needed to get settled.
Expat car buying services, such as International AutoSource (IAS), can help an Expat secure a new vehicle without the need for a local credit history in the United States, Canada, UK, and Japan. IAS offers full-service personal transportation solutions that Expats can utilize both before and after relocation. Our programs can assist in all aspects of the car buying process, in addition to helping to obtain low-cost auto insurance. Learn more about how a bad credit score affects your auto loan rate.
By Gina Valiando – International Autosource