Does Moving Abroad Affect Your Credit?

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 India to Canada.

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 little to no debts to your name, then transferring your credit score would have made your life so much easier abroad.

But it doesn’t work that way. 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 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.

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 U.S., 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’s no way for the foreign credit bureaus 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 bureaus outside the country. While a credit bureau might share your report with lenders in the country, consumer data protection laws forbid them to talk about your credit score to organizations outside the country. This gap in communication between two credit bureaus 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’s not a good enough reason, then here are 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’s 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 Assets at Your 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.

How to Build Your Credit Score in a New Country

For better or for worse, your credit score and debt stay put in your home country when you immigrate abroad. So, how does one build their credit score from scratch in a new country? Simply follow these tips:

Getting Credit

It can be tricky to get a line of credit in a new country where you have no credit history. You could try getting a secured credit card that comes with a security deposit equivalent to the credit limit. You can look for lenders that provide credit building loans. These loans are not your typical personal loans as you don’t get the loan right away. You get access to the loan only when you have made the payments at regular intervals.

Make Payments on Time

Once you obtain some line of credit, you mustn’t defer or default on payments. You must maintain a clean repayment history as it’ll work towards improving your credit score.

Gradually Increase Your Credit Card Limit

When you opt for a credit card, avoid high credit limits even if they’re readily available. Test your expenditure and repayment capabilities with a lower limit to avoid the accumulation of debt and gradually move to a higher credit limit.

Keep Track of Your Credit Score and Talk to an Expert

After a few months, you can apply for the credit report to keep track of your credit score. If you’re seeing no improvement in your score, you might want to discuss it with a credit expert.

Moving to a foreign country is a big decision. While you look for ways to establish your credit in a new country, don’t neglect any existing debts that you hold in your home country. Iit can seriously damage your credit score, and leave you entangled in a legal hassle.

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