Anyone who’s incurred a large amount of student debt will admit to the occasional impulse to jump on a one-way flight abroad and leave their subpar credit score behind them. After all, when your options are limited to paying off loans well into your forties, or moving somewhere with lower living expenses, higher pay and never seeing your debt again, it seems like the perfect solution, right? Not quite.
Credit rating systems vary by country, but current debt will be examined when applying for a visa in a different country. If it appears you’re trying to avoid paying off debt, your application will likely be denied.
If you’re looking to relocate and have an admirable credit score, you may be frustrated to find out that you can’t take your score with you and that expatriates are responsible for maintaining their credit while abroad.
Credit Score Systems Around the Globe
Many credit reporting systems are modeled after that of the United States, which can make the adjustment a little easier. Canada for example also grades credit based on payment history, credit account history, recent inquiries and types of credit, with scores that range from 300 to 900. The UK and South Africa also have fairly comprehensive credit systems. One major difference in the UK is that credit reports list whether citizens are registered to vote, and a failure to register can be seen as unfavorable by lenders.
South America has fairly strong credit reporting systems, a response to economic crises that many countries experienced in the 1980s. Bangladesh, India, Pakistan, Egypt and Morocco are examples of emerging markets still in the early stages of developing robust credit reporting systems. These countries have begun to offer “microcredit” options out of necessity, which provide very small loans to help families pull themselves out of poverty.
Smaller islands in the Pacific and Caribbean are unable to sustain their own credit systems, and there is an effort to establish one or two large credit bureaus that can serve multiple countries.
There are several countries that only report negative credit information, such as Australia, whose lenders rely on applicants to be transparent when reporting balances on other accounts. France, Portugal, Spain and some Nordic countries also follow this practice, although they are slowly changing to include positive credit information.
Setting the bar for credit systems of the future are East Asian countries like Malaysia, Hong Kong and Singapore. They have combined consumer credit reporting and commercial credit reporting, which is specifically valuable for small and medium enterprises trying to obtain credit.
So, next time you’re tempted to ditch your debt, do a little research into credit systems around the world. You might be better off staying put!