Credit advice for immigrants

The game of credit is not always fair – and, for some, getting a loan of any kind can be almost impossible. Julianne Dowling explains how becoming creditworthy can change everything.

Say you’ve been overseas for several years – maybe working, maybe not. And when you come home, you want to resume your life and buy a car or get a loan. Trouble is, the banks probably don’t want to know you. You may even have trouble renting an apartment. And when it comes to getting a new credit card, you fail.

Suddenly, you feel like a stranger in a strange land. What’s going on? Getting into debt is one thing; just getting credit is another. If you’re a newcomer to our country or a mum without two years of tax returns, the situation may be worse.

Three and a half years ago, Swedish-born Susanne Ridolfi migrated to Australia with her Australian-born husband Ray and two sons. The couple had estabalished a network of Oriental medicine training franchises throughout the UK, and on arriving in Australia set up BodyDynamics, a wellbeing consultancy.

Susanne says the biggest shock she encountered was the attitude of the banks and financial institutions. “It was surprising, considering how much work you have to do to get into this country – with criminal and medical checks – that nobody would give us a credit card or a mortgage. Even though we had migrated with substantial financial resources and a successful business generating a six-figure income, no-one wanted to know about us.

“All our banking was in the UK and we hadn’t transferred it, so we were operating from English accounts for the first six months and used online banking to make transfers to an account here,” she says. “We had to wait at least two years before they would even consider looking at us for finance. We were forced to use our international charge cards. To get a Visa card, we had to work with our accountant to get acceptance from a bank,” she says.

“After a year, we decided to keep renting and invest in a serviced apartment. Getting an investment loan was difficult, because Ray had been away for twenty years and we had no employment record here. So, we had to get a Lo Doc loan with a higher interest rate.” 

Understanding the fine print
Jo* had a similar experience when she came across the Tasman to take an exciting role with a marketing group. Despite her employer’s sponsorship, she found that the major banks were not keen to give her finance for a car – even opening a bank account was an issue.

She says she was surprised that access to credit and bank accounts seemed so difficult to get, even though financial institutions could crosscheck with her New Zealand bank.

“I was living in accommodation paid for by my employer for two months, so I couldn’t produce a utilities bill or receipt in my name. No-one at the bank asked what I earned – all they wanted to see was an electricity bill,” says Jo.

“Coming from a country where the banks fall over themselves to lend you money, I was amazed to be treated like a nobody. Then my son came to live with me for a year. We got a Foxtel account in his name and ANZ – the same branch that had turned me down – opened his account immediately. The irony was that my son only had freelance work!”

When Jo did buy a car, a brand-new TT Audi, a car company organised hire-purchase finance from St George. “I had to pay a $6,000 cash deposit and, because I agreed to pay for the car in less than four years, they must have figured I was a good risk,” she says.

A Citibank spokesperson says you can’t open a Citibank credit card or personal loan account in Australia if you’re not a permanent resident.

But if you come from, say, the UK on a working visa and you are an existing Citibank customer, there are “channels we can go through to set up an account”.

Citibank says Jo could have set up a Citibank Traveller Account from New Zealand, which would have meant she’d have had a transaction account ready for use when she arrived.

* Name changed on request.

 

Getting in the loan zone
Lo Doc loans for mortgages (see ‘The future reapers’, February 2006 issue) are often popular with divorcees and business owners, because they require little or less documentary evidence of income. But the Australian Tax Office has began to monitor Lo Doc loans for discrepancies in declared income shown on tax returns.

In Australia, reporting agencies tend to focus on a negative credit rating rather than a positive rating, says Anne-Marie Syme, managing director of The Loans Café and an active member of the Western Australian mortgage industry. Anne-Marie has previously worked for a number of prominent lenders and has a good insight into credit profiling.

“Lenders look at character and collateral, such as security over the loan. Character plays a good part and brokers can assist you with that as third parties. I advise people who have had any finance that has been paid off without default, such as interest-free terms from Harvey Norman, to keep those letters to prove to lenders that you are a worthy client. This will give you kudos with a lender. Even a letter from a property manager that shows you have paid the rent in a timely way can help.”

Similarly, if you’re a new migrant or returning from a lengthy stint as an expatriate, showing that you have discharged loans overseas assists. Banking is the same the world over, she says, and preparation is the key.

Another loan specialist says he has already seen some of the local major banks easing up on their guidelines this year, and that’s good news for women who have no recent history of a job or steady income. If a woman is returning to her career in the original industry she trained in, it is a tick on her credit score.

“Banks are cashed up and looking to approve loans rather than knock them back,” says Anne-Marie. “If you’ve been a hairdresser and plan to return to that industry, you have a history. But with sales, for example, because it is commission-based and crosses industries, you don’t have to work in the same field.”

Mortgage and finance brokers canvas rates of multiple institutions and, in theory, give you a more competitive choice than a bank’s ‘loan of the month’. Although some critics warn that a broker’s loan recommendations may be influenced by commissions, a good broker can help on many fronts.

Words: Julianne Dowling. Photography: Scott Hawkins. Hair & make-up: Jay Jay Rauwenhoff.