How the U.S. Scoring System is Different from the Rest of The World

Credit scoring systems vary widely across the globe. Some countries use multiple credit bureaus in order to report repayment history while others use none and rely more on self-reporting or income statements. The United States appears to have the most robust scoring system in the world with the most financial data and reporting requirements.

Canadian Credit

The Canadian system of credit reporting is quite similar to that of the U.S. TransUnion and Equifax are also established bureaus there. The main difference is that the max Canadian credit score is 900, instead of the American 850.

United States Credit

The aspect that is most uniquely American is the reporting of essentially “all consumer debt obligations”. The U.S. has the most in-depth credit system in regards to the rest of the financial world. There is a multitude of data and many intricacies about how our credit system works and is reported by the three major bureaus due to the fact that we report all payments on all debt obligations. The three major bureaus are now even going to begin reporting buy now pay later accounts.

The Rest of the World

This may appear to be an over-generalization about the rest of the world, however there appears to be a trend that the rest of the world tends to rely more on “negative reporting” as opposed to the US system of reporting everything and acknowledging all on-time repayments. So, this is almost an inverse way of reporting credit statistics which makes sense also, since there less to report when only negative remarks on noted. However, this also means that data is less robust.

Some countries do not have credit reporting systems at all and use other types of documentation, like bank statements, payment records, income, outstanding mortgage balances, etc. This is the most common practice in France.

Japan doesn’t have an official scoring system and how they determine a good credit risk is mostly based on salary and a consumer’s relationship with the bank. In the U.K., being a registered voter raises your effective credit score. Australia has 4 credit bureaus and most commonly makes use of Dun and Bradstreet (one of the same bureaus that reports business credit scores in the U.S.)

Of all Nations’ in the world, the most distinctly notorious credit scoring system is that of China’s. The reason being is that China has effectively implemented a “Social Credit” system with its citizens. This has already been attempted in recent years and has caused a great deal of media coverage recently, as this social credit is essentially public knowledge and, in a sense, shaming its citizens with bad credit. Essentially how bankruptcy is public in the U.S., having bad credit is also be public in China.

Unless stated otherwise, credit bureaus and reporting agencies are only likely to make note of derogatory marks/delinquencies as opposed to reporting all “timely” payments. Although, other countries have adopted this practice, this is the “most American” aspect that comes to mind. This practice is most common in EU Nations like Spain & the Netherlands but also in Brazil.

The Landscape is changing for the rest of the world

FICO has recently stepped into Brazil to begin implementation of a credit bureau and will likely continue doing the same with other nations. As the world economy develops and access to capital spreads to less developed nations its very likely that credit becomes more of a staple in developing countries. This could potentially mean that FICO and other bureaus move into these landscapes to help fill the gap in the hopes of gaining market share.