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Leaving debt behind in another country

You can run, but you can't hide forever

By

To Her Credit
To Her Credit, Sally Herigstad
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com, and also wrote for MSN Money, Interest.com and Bankrate.com, and has guested on Martha Stewart Radio and other programs. See her website SallyHerigstad.com for more personal finance tips and free budgeting worksheets.
Ask Sally a question, or read her previous answers in the To Her Credit archive
Question for the CreditCards.com expert

Dear To Her Credit,
I have accumulated debt on my credit card and recently quit my job. Now I am looking to quit the UK. What impact will this have on my credit rating, if at all? Will the UK bank try to seek the money elsewhere from me?

What are the implications, for me (internationally) in my native country? I am not usually one to not pay off my debts, but was in a very difficult position and now am not earning nearly enough to make minimum payments, let alone clear the debt. -- Lillian

Answer for the CreditCards.com expert

Dear Lillian,
I wouldn't bank on being able to just move away from your money troubles.

"It would be difficult, but not impossible to start afresh by just moving away," says Wesley K. Young, legislative director, The Association of Settlement Companies (TASC) and general counsel, Debt Settlement America. "It is difficult in this day and age to get away from your debts because the banks so easily share information internationally." As banking becomes more automated and interconnected, your creditors' chances of finding you will only get better over time.

You have a better chance of leaving your credit score behind when you move. Surprisingly, credit scores are not international -- at least not yet. Andy Jolls, CEO of Videocreditscore.com, a credit scoring educational site, says, "Banks in the UK do not report to U.S. bureaus in most cases. But the real question is whether the debts are reported to a collection agency that crosses international waters."

The only way you can know for sure if your credit score followed you is to pull your credit report when you get back to your home country. Jolls says, "My short answer is that her debts may not follow her. While that might seem like good news, the bad news is that she will have to start all over to build credit.'

Barry Paperno, consumer operations manager of FICO score developer Fair Isaac Corp., agrees. "Our experience at Fair Isaac indicates that credit bureau information does not tend to cross borders -- even within the same international credit bureau. After making such a move, your FICO score will be based solely on your credit history at the credit bureau in your new location and is not likely to include any of your credit history acquired in other countries previously."

Even if you can start afresh on your credit score and your debts never catch up to you, I don't recommend simply moving away from your problems. You don't want to spend the rest of your life wondering if or when those debts will come back to haunt you.

After you move, find a financial counselor if you need one and look at all your options. As soon as possible, make a plan to start paying down your debts. You may be able to negotiate a lower settlement, especially if a large part of your balance is from fees and interest charges. If all else fails, even bankruptcy -- a move I almost never recommend -- might be better than leaving debts in limbo forever.

If you were not moving, you would find a way to work this out; you can find a solution once you get settled. Financial problems are never hopeless.

Good luck with your move. I wish you the best in your new life!

See related: Moving abroad? Your credit history might not follow

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Published: December 26, 2008


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