Cross-border credit reporting is at last becoming a reality
THE WINDOW to submit applications for an H1B visa, a golden ticket for foreigners wishing to work in America, closed on April 5th. Soon the 85,000 winners will take up new jobs in the land of fresh starts. But those lucky few, most of them highly qualified, and many handsomely paid, will leave their credit histories at home, rendering them invisible to financial institutions. They will find it almost impossible to get a credit card, mortgage or any other type of loan.
It is a difficulty that affects millions worldwide. In 2017 immigrants made up 17% of America’s civilian workforce. Despite having free movement of labour as one of its core principles, the European Union has no system for transferring credit records across its internal borders. Banks suffer, too, missing out on potentially lucrative customers.
Building a new credit profile from scratch takes time. But what if you could use a credit report from your home country when applying for a loan abroad? That is the idea behind Nova Credit, a financial-technology startup in San Francisco. It requests data from international credit bureaus such as Experian and Equifax (with the individual’s consent), paying a fee for the service. It then packages the information to be usable by American banks and landlords. Mpower, a student-loan company, is already using Nova Credit’s data to help it make lending decisions for international students.
The company works with bureaus in countries that send lots of migrants to America, including India and Mexico, as well as some that send fewer, such as Brazil, Britain and Canada. China and Nigeria will be added this year. It also imports data to Canada, where immigrants are a fifth of the population.
The hard part, says Misha Esipov, Nova Credit’s boss and co-founder, is dealing with the many origins and destinations for migrants and data, and therefore a massive, non-standardised jumble of databases. Not only do most countries have several credit bureaus as well as their own rules on credit-reporting, but rules on consumer privacy and data protection also vary. Coping with the mess is too much trouble for most lenders, especially domestic-focused ones. That is where Nova Credit comes in. It cleans up the data and transfers them to the American lender, which is how it makes its money.
Individuals request their own credit reports and consent to pass them to Nova Credit. Often they do so while still on a lender’s website, with Nova Credit a simplifying intermediate step. “We’re just a tech platform that allows a customer to gain access to their own information,” says Mr Esipov. His firm has found a way to make money from a notion that is still subversive in Silicon Valley—that people should be able to control the use of their data.