Financial basics for all expatriates and immigrants!
The process of moving is already a hassle and indeed stressful, but moving to a different country can be more than a pain.
However, when you know how to build and manage an excellent credit score, relocating across the border will make finding a home, an automobile and, in some cases, even a job much simpler. Once you obtain your U.S. identifications (i.e. your Social Security Number, green card or work visa), you’ll be able to work with the right financial preparation to build your credit easier, so what can you do before then?
Establishing your credit history.
Typically when you move to the USA, your credit score (if you had one) from your previous country will not factor into the states’ credit-reporting agencies. This means you’ll likely have to start from scratch. Credit affects your ability to lend and buy a car, as well as your insurance premiums and the like, so it is important to know where to start.
There are a couple ways you can establish your new credit history.
Once you have an accepted form of U.S. identification, you can apply for a secured credit card with small limits like $500 to $1000. They are available from banks as an easy starting point, but usually you’ll need a SSN for one. If you haven’t received your identification yet and need to work on your credit quickly, no worries. Or you could try some online alternative credit cards that require no credit history or SSN to apply, but may come with a significantly higher interest rate.
Alternatively, if your previous country holds international branches, they may have a temporary facility to cover you for a short time or may be able to open international accounts for you, to allow you to use credit facilities immediately. Also, if you have family in the USA, you may be added as a cardholder or card user.
Considering your taxes.
To further assist in building your credit, ensure all your tax information is complete. Preparing your cross-border financial plan could include a checklist of the following questions:
1. Do you need a FBAR (Report of Foreign Bank and Financial Accounts) form to be added to your return?
2. Are you aware of Passive Foreign Investment Company (PFIC) impacts regarding your investments or any other country specific taxation issues?
The IRS has specific requirements for if you do or do not need to fill out a FBAR. The general rule is any foreign financial accounts, like bank accounts, brokerage accounts and mutual funds that exceed $10,000 at any time during the calendar year must be reported.
The rules for any PFIC income you receive are little different. The IRS currently requires certain PFIC shareholders to file a Form 8621, or a Form 8938 for specified foreign financial assets that exceed $75,000 at any time during the tax year. Failure to do so, if you fall in line with the requirements, can result in debts up to $10,000, which detrimentally affects your credit.
Meeting the retirement demands.
While you may not need to borrow once you retire, it’s better to be safe than sorry, especially considering families can lose all of their savings paying for medical costs not covered with their health insurance(which is a whole other topic itself!).
For expats to be eligible to collect their SSN retirement benefits, you must have completed 40 quarters of employment and/or contributions, or else you will not be entitled to any state retirement provisions. Have you completed an analysis as to whether it would be worthwhile continuing to contribute to your previous country if applicable in the event you do not complete these 40 quarters? Is that available? These are considerations for you.
Alongside the tax implications of any foreign employer or pension plan benefits you may be entitled to at retirement age, knowing how you can claim these benefits and how they’ll be managed before you reach claiming age, is also imperative for your holistic financial well-being.
These are some elements of cross-border financial planning that we work through. If you’re planning to move to the USA, or if you’re new here and need help establishing your credit, we’re happy to help you. Book a complimentary call here with one of our financial advisors to begin building your credit and opportunities stateside.
Please note: These are just some considerations of cross-border financial planning that we work through. If you’re planning to move to the USA, or if you’re new here or even if you’re not …..but you’d like help establishing or improving your credit, we’re always happy to have a conversation about your options.
