Don't think you can incur debt in another country and skip out on paying the bill simply by returning home. Just like in the U.S., the foreign creditor will eventually turn your debt over to a collection agency and debt collectors will soon come looking for you. Depending on the type of debt and how much you owe, a foreign debt could end up on your credit report and damaging your good credit record for years to come.
All creditors whose accounts appear on your credit report are able to file those reports because they hold contracts with the credit bureaus that give them the ability to update consumer credit records. A credit reporting contract isn't free. Prospective creditors must undergo a lengthy application process, pay a membership fee and purchase expensive corporate software allowing them to compile and send their reports.
Part of the application process for a reporting contract requires the creditor submit to a on-site inspection by credit bureau representatives. Even if a foreign collection agency were willing to take the time and expense necessary to acquire an American credit reporting contract, the credit bureaus will not send a representative to inspect an international business.
A foreign collection agency's inability to report a debt on your credit report directly does not mean that the account won't show up there. Foreign creditors have the option to hire U.S.-based collection agencies to conduct collection activity in their stead. Provided the U.S. based collection agency the foreign collector hires holds a reporting contract, your foreign debt will show up on your credit record by way of the U.S. collection agency.
The Fair Credit Reporting Act, not the laws of the country where you originally incurred the debt, governs the amount of time any collection account can appear on your credit report. Thus, the credit bureaus must delete the account seven years and 180 days from the day you stopped paying your original foreign creditor -- not seven years and 180 days from the date the U.S. based collection agency first acquired your debt or originally reported that debt to the credit bureaus.
Just because a foreign creditor can pursue you for an unpaid debt does not mean that it will. Whether a foreign creditor will hire a U.S.-based collection agency depends on the company's individual policies and the amount you owe. The more you owe, the more likely the foreign creditor is to put forth the expense of tracking you down and hiring an international creditor to pursue you for the debt.
- The Service Bureau; FAQ; 2011
- Federal Trade Commission; The Fair Credit Reporting Act (Section 605/p.22)
- U.S. Department of the Treasury; Guide to the Federal Credit Bureau Program; November 2005
- Federal Trade Commission; Debt Collection FAQs – A Guide for Consumers; February, 2009
- MyFICO: What's In Your FICO Score; 2011