Whether you’re newly arrived in the United States or have financial ties overseas, you might be wondering what to do with any outstanding debts. Does credit card debt follow you internationally? Will it impact your US company credit score? Here’s what you need to know about paying off foreign debt.
How is a business credit report compiled?
As with a personal credit score, your business credit report assesses your creditworthiness. It’s in any business’s best interest to build a positive score, because this will improve your chances of accessing loans and lines of credit with favorable borrowing rates.
There are three main US credit bureaus that provide business credit reports:
Dun and Bradstreet compiles reports using financial details provided by the business owner as well as its vendors. It then issues a score based on payment history and financials.
Equifax is also known for its consumer credit reports, but it uses similar methods to pull together business credit reports.
Experian is another consumer credit reporting agency used to evaluate business credit according to vendor details, business financial reports, and payment histories.
Unpaid debts and poor reports from vendors will cause a poor score, but does this apply to debt collection in foreign countries?
Does credit card debt follow you internationally?
The first thing to understand is that US credit files are maintained separately from those in other countries. Each country will have its own credit regulations, making it virtually impossible to create a unified report that applies across global borders. If you’re wondering “is your credit score international” the answer is usually no – although we’ll discuss some exceptions below.
At the same time, there are numerous banks and credit card companies with an international presence. If a business owner opens a credit account with a bank based in both the UK and the US, it’s conceivable that the details would transfer from one country to another. While your credit score might not be international, in this case, your debts might be. For example, imagine that you’re a US expat who has opened an account using your UK address while living overseas. When you return to the US, if you want to visit a branch of the same bank, your UK details will likely appear in the system. If the bank reports a delinquency, it could transfer over to the new US address and corresponding credit report.
Is your credit score international?
In addition to the scenario described above, there are some companies specializing in international credit reports. One of the problems with different credit systems is that newcomers to a country can’t bring their good credit with them either. This means they’re starting from scratch, even with a history of on-time payments in a foreign country. Some online credit companies are now pulling together credit data from a variety of countries to create a specialized equivalent score for businesses to share with lenders. Once you’re able to start a credit line in the United States, this will form the foundation of a new credit history with the main US credit bureaus.
Time limitations on foreign debt collection
What about debt collection and foreign countries? As with domestic debts, if you don’t pay your bills the lender will turn over the account to a collection agency. It’s possible for the foreign collection agency to chase up the debt in your new country. However, foreign debt collectors must also follow the rules of the Fair Credit Reporting Act. This means that credit bureaus must delete the debt in question after seven years and 180 days.
How to build your business credit
So, does your credit score follow you to another country? It’s complicated. If you want a fresh start, the best thing to do is cut all ties with foreign liabilities by paying off outstanding debts, wherever they may be.
At the same time, you can start working on building a positive credit report in your new country. List your new business in local directories, open a business bank account, and create a website to build a legitimate presence. This will enable you to start working with US-based vendors, building your reputation – and credit report – from the ground up.
We can help
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.