Naturalization and permanent residency's effect on mortgages, credit cards and loans

Japan Post Office's a bank too

When people migrate to a foreign country, one of the frustrating aspects can be establishing a line of credit or receiving a loan. They have an equivalent job and income compared to what they had in their home country, and they were able to get a credit card there (at a much younger age). So why are they declined for credit (often for much lower rates) in Japan?

One bit of misinformation that is floated around the net is that it is (sometimes depending on the bank) impossible to get credit (especially a home mortgage or a credit card) unless you are naturalized or perhaps a permanent resident.

The truth is that yes, being a permanent resident and especially a naturalized citizen helps. But it is not the only variable. It is merely one variable. When a bank decides to extend credit to an individual, it considers a host of variables used to determine the credit worthiness. In other words, if you're a foreign resident of Japan, you will have to work harder on the other variables that are evaluated (stability of your residence, stability of your job, etc) than somebody with permanent residency or Japanese nationality, but it is possible to obtain almost all types of credit for almost all the banks in Japan if the other factors are strong enough.

One frustrating thing about how credit histories work is they are not transferable across borders. This means that even if you have a good credit history in your home country and you've have a Visa or MasterCard issued by a bank in your home country for many years, Japan's financial institutions — including the local issuers of MasterCard and Visa, and even the Japanese subsidiaries of banks whose headquarters (ex. Citibank) may be in your country — have no way of knowing this.

And to most institutions evaluating a person for credit worthiness, having no credit history is almost (but not quite) as bad as having bad credit history. Unfortunately, this is a Catch-22: you need good credit history to get credit, but you need to have credit to make a good credit history. The first credit card is always the hardest.

Many foreign residents of Japan find, much to their chagrin, that if they return back to their country after being in Japan for a very long time, they have a difficult time getting credit in their home country as a national because their credit history within their home country has been inactive for many years. I once returned back to the United States for a five year assignment. Although I had great credit and a stable job for many years both in America and Japan, I had a hard time initially getting credit cards and loans because in America's eyes, I had "disappeared" for ten years and my credit history for the last decade was effectively blank.

When I first arrived in Osaka, Japan over 20 years ago, my employer set me up with a Sumitomo Bank (住友銀行 {Sumitomo Ginkō}) account, which is now called 三井住友銀行 {Mitsui Sumitomo Ginkō} (Sumitomo Mitsui Bank) in the 21st century after a M&A during the Japanese economic bubble collapse.

I applied for many credit cards after a few years with a three (3) year SoR of Engineer (技術在留資格 {gijutsu zairyū shikaku}). And I was turned down for every single one of them. All of them. Including cards from my "home" bank that I was loyal to. I received warning advice from others to stop applying for a while as the amount of applications may affect my chances for a while.

However, after another decade in Japan, my career had advanced considerably, and I had lived (rented) in the same place for a long time, and had worked at the same place for a long time, so I tried I applied again. And I was accepted. By all of places I applied to. Even Sumitomo, which has a reputation for being the card most difficult to get for foreigners, offered me their best card with good low interest rates. I got all of my credit cards (I actually cancelled a few because I had too many I didn't need), including a few with ridiculously high credit that I'd never use, before I ever received permanent residency status or naturalized and got Japanese nationality.

When I applied for my first home loan, I did not have naturalization but I did have permanent residency. My realtor, who knew the state of my finances, said that there would definitely be one or more banks that would offer me a loan. He first recommended that I try BTMU (三菱東京ＵＦＪ銀行 {Mitsubishi Tōkyō UFJ Ginkō}／ＭＵＦＧ) because they had the reputation for having the friendliest credit policies towards non-Japanese. While they indeed accepted my application, we actually found that Sumitomo, which has the reputation as being the most difficult for foreigners, offered me a a thirty (30) year fixed mortgage with the best rate at just a hair above 1%.

There are people that get accepted and rejected for all sorts of reasons, but regardless of whether you're a foreigner or a national, you generally want to fulfill the following requirements for your application to look good:

• You want to have lived in the same place for more than a year. The type of place (rental, owned, dormatory) and who owns it makes a big difference.
• You want to have worked at the same employer for more than a year
• You want your employment to appear stable (a larger firm and full time employment). For example, a firm with a larger capital base (資本金 {shihonkin}) and a significant amount of employees. Sometimes foreign firms which are capitalized overseas do not have public numbers associated with the capitalization of their overseas branches.

Even if you don't meet all of the above criteria, it's still possible to be accepted if your income is stable and large enough and your residency in one place (within Japan) is long enough.

So, what companies that provide credit do is assess you via a bunch of variables to assess your stability. Whether you are a foreigner with a standard SoR (在留資格 {zairyūshikaku}) or a permanent resident (永住者 {eijūsha}) or a naturalized citizen (帰化者 {kikasha}) is an important variable (though different companies will weight it differently), but it is not the only variable and it's not even the most important variable. Stable employment with a good employer and a good credit history is.

It is possible to get a home loan even if you are neither naturalized nor a permanent resident. Although if two people are exactly alike in their employment and living and wealth situation applying for the exact same type of credit with the exact same company, then the person with PR, and then the Japanese national, will probably receive more offers (acceptance) and/or better terms (limits and interest rates).

Having a Japanese sounding or looking name will probably not help you get accepted; the credit check process can tell whether you are a foreigner or not no matter what your name is.

Similar evaluation criteria applies to unstructured credit such as credit cards. It's generally easier to get accepted by cards tied to retail chains, whose cards are offered with lower credit limits, than major banks at first until your credit, living, and employment history improve. Once you get your first card, getting later cards becomes easier as you establish a credit history within Japan.

If you have any questions about your credit history, there are firms that will allow you to check your credit trustworthiness in Japan. Some of them include:

• The Credit Information Center (CIC)
• The Japan Credit Information Reference Center Corp. (JICC)

The cost for checking is not free and will be anywhere from ¥500 to ¥1000 depending on how you check it (internet, postal mail, in person).