Do Existing Debts Impact Credit Score When You Move Abroad

All my bags are packed, and I am ready to go. But will my existing debts follow? This slightly distorted version of John Denver’s song played in my head as I planned my move from the UK to US.

Like many before me, I wondered if my credit score will follow me abroad. More importantly, will my existing debts impact my credit score in a new country? From renting a house to applying for credit cards, credit score plays a major role in availing basic amenities in a new country. I was worried if my credit score and credit card debts back home would hurt my credit score abroad. As it turns out, neither your credit score nor your existing debts travel with you once you leave your home country.

When you immigrate to a foreign country, you have no credit history, and you have to build your credit score from scratch. In other words, credit score and unpaid debts from one country don't impact your credit score in another country. Depending on your credit score and debt history back home, this could be a boon or a bane. If you maintained a good credit score in your home country with negligible or nil debts to your name, then transferring your credit score could have made your life so much easier abroad. But it doesn't work that way (I will explain it in a bit). And, if you had an existing debt and a poor credit score in your home country, then you can consider it as a chance to start fresh and build your credit score from scratch in a new country. But that doesn't give you a pass to not repay your existing debts back home as it could lead to legal complications (I'll elaborate this ahead).

Why existing debts and credit history don't impact your credit score abroad

Different systems to calculate a credit score: Every country has its own way of computing credit scores. The parameters used in determining the credit score in the US, such as type of credit, outstanding debt, payment history, etc. can be different when compared to other countries. Also, every country has its own credit organizations that keep track of credit history and credit score. The difference in the way a credit score is calculated in your country compared to a foreign country is the main reason why you can't carry your credit score abroad. When your credit score from your home country is deemed useless abroad, there is no way for the foreign credit unions to know about your unpaid debts.

Consumer Data Protection Laws: Stringent data protection laws are another reason why credit organizations don't share your credit report with credit unions outside the country. While a credit union might share your report with lenders in the country, the consumer data protection laws forbid them to talk about your credit score to organizations outside the country. This gap in communication between two credit unions from different nations creates a barrier to transfer your credit score abroad.

Why you should continue repaying existing debts in your home country

• Paying your debts is the morally right thing to do. But if that is not a reason good enough, then I give you three solid reasons why you should continue repaying your existing debt.
• It still impacts your credit score back home: Most immigrants move abroad for the long haul. But if you have plans to move back later or even plans to visit your family back home, then it is essential to maintain your credit score at your home base. Your non-payment of existing debts might not affect your credit score abroad but it could severely affect your credit score back home.
• Your creditor could sue you for non-payment of dues: If you try avoiding your outstanding debt, your lender can take the legal route and sue you for non-payment of bills. Don't shrug it off as a scare tactic as your lender can actually file a lawsuit against you. Turning blind eye to existing debts can lead to court summons for your name.
• Your creditor could take possession of your asset at home country: If you have opted for a secured loan like a mortgage or a car loan, then make sure you pay your dues on time. If your mortgage payments are in arrears, then your creditor can opt for a foreclosure, claiming the possession of your house and reselling it to make up for their loss. And, it is not wise to lose real estate in an attempt to escape payments.