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Expats in U.S. Struggle to Establish Credit
HR should assist relocating employees well in advance of arrival

By Steve Bates  8/11/2014

Three years ago, Sheldon Kenton moved from the U.K. to the U.S. with a good job as a senior leader in a large company, a good salary, a young family and great expectations. What he didn’t expect was to be treated like a kid straight out of high school with a zero credit score.

Without a U.S. credit rating or a Social Security number, Kenton ran into brick walls trying to get credit cards and set up utility accounts—everyday tasks that most Americans handle relatively easily. Kenton, who is senior vice president of global employer sales for Delaware-based insurance firm Cigna, spent his first days in the U.S. trying to make headway in his work instead of taking care of personal and family logistics. Those personal tasks soon consumed his time and attention. It took him so long to get cable TV service—nearly a month—that “I actually celebrated when I got it,” he said.

His advice to other expatriate employees coming to the U.S.: Take time to deal with the financial logistics, then focus on the job.

Many HR professionals and the expats they welcome to the U.S. do not realize that expats’ credit histories don’t travel with them and that they must start from scratch. Expats have to stand in line to apply for a Social Security account; they have to find a bank and a credit card issuer who will deal with foreign nationals; they have to hunt for a landlord willing to rent to them; they have to scramble to find affordable car loans. And they have to do all this while learning a new job in a new country, and in many cases while mastering a new language.

“The basic things are incredibly difficult,” said Ed Hannibal, global leader of mobility services for consulting firm Mercer in Chicago. Expats arrive in the U.S. believing that “this is the land of milk and honey,” he noted, but paying for that milk and honey will deplete an expat’s transition allowance quickly if he or she does not act fast to establish credit. And cash won’t secure an apartment or a car.

Get Help

Employer-retained relocation companies provide assistance, and specialty vendors are popping up to serve the expat population. HR professionals can make these programs available to expats. But expats need to be warned in advance about the credit difficulties they will encounter and must get help as soon as they arrive. Expats who try to get established on their own often wind up with bad deals, such as car loan rates of 15 percent.

In addition, expats need schedule flexibility. “A lot of the time, their managers don’t understand the time required” to deal with credit-related issues early in an assignment, said Rob Kreiling, a business development consultant with mobility services firm Runzheimer International in Bradenton, Fla.

“Every assignee is affected to some degree,” said Andrew Cox, founder and CEO of Dallas-based Mycredex Credit Migration Services, which helps expats handle personal financial issues during their first days and weeks. “It’s costing them money and their companies productivity.”

“It’s a stressful time for expats,” said Janelle Gerber, vice president of global relocation services with Paragon Relocation in Chicago. “They’re realizing that they just can’t do it on their own. And the longer it takes for them to settle in to their assignment, the longer they are distracted.”

Americans returning to the U.S. after many years working abroad are finding some of the same problems as foreign nationals taking jobs in the U.S.

Not every employer takes full advantage of relocation services and vendors that can help arriving expats. “The largest companies understand all of the issues,” Kreiling said. “Small to midsize companies that are expanding internationally don’t have all the expertise.”

Establishing Credit

Vicki Ragavanis, business development manager at International AutoSource in New York, which provides car leasing and financing for expats, says her company does not use credit scores. Instead, it looks at things such as a letter from the employer stating the person’s position and salary. She said making car loans to expats is just good business. “The default rate for foreign nationals is much lower than it is for the average American,” she explained.

About 15 years ago, a few global banks started providing services for expats, including mortgage programs. However, after Sept. 11 and the financial crisis, “Credit tightened up and these programs started going away,” Kreiling said. Today, expats sent to the U.S. often have to build credit for a year or more before they can hope to secure a mortgage loan.

Ragavanis said expats are beginning to speak up about their transitional woes. “It has become more of a hot topic in the last year than ever before,” she said. “Organizations are starting to get feedback from their employees that this is an issue.”

Being told that you have no credit “is embarrassing and infuriating” for an arriving expat with many years of work history abroad, said Lisa Johnson, global practice leader, consulting services, for Crown World Mobility in New York City. “HR has a responsibility and an onus to set expectations for expats, to say that this is the reality and here’s how we’re going to deal with it.”

Providing that support “is part of your credibility. It reflects on your whole company,” Johnson said.

Organizations have “a financial duty of care” to prepare expats for their roles in the U.S., Hannibal said. “There’s growing visibility about this need, but it hasn’t improved much in 20 years. … And it’s more challenging if you are a junior person.”

“This is a shared responsibility,” said Nathalie Franklin, executive director of financial services firm Ernst & Young in Dallas. The employer must provide services and advice, but the employee has to handle the key actions personally.

Organizations should “establish an open dialogue and clear communication between the mobility team and the expat” as soon as the individual is chosen for an international assignment, Franklin said.

Steve Bates is a freelance writer based in the Washington, D.C., area and a former writer and editor for SHRM.

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