International Debt and Credit Scoring Query

NewCanuck

Hi Folks,

My situation is a slightly complicated one and I was hoping to get some help / advice from the experienced and thoughtful folk on this board.

OK here goes...

I emigrated from the UK to North America last year with work. I plan on staying here and not returning to the UK for the foreseeable future. As I did not have time to sell my house before I left I have kept t it and am currently renting it out through a letting agency.

I have credit cards debts ( 3 cards ) totaling around 18k. I also have a home loan I took out to build an extension on the house, the balance of which is around 18k. Due to the recession and housing market crash in my city the value of my house has dropped significantly. (Down from around 250k to 180k) I owe about 160k on my mortgage. So insummary in the UK my situation is this:

Approx house value: 180-190k max
Outstanding mortgage: 160k
Loan Amount: 18k
Credit cards: 18k

I'm currently sending money back to the UK every month to service my loan and credit card repayments. The monthly rent I get covers the mortgage, the loan repayment and some of the credit card payments. That said I can no longer afford to keep sending money back to the UK and the interest rates on my credit cards mean I'm making a minimum monthly payment but not really biting off any of the capital I owe.

Ideally I'd like to sell the house, pay off the loan and mortgage. And that will leave me nothing to transfer over to America to use as a deposit to buy a new house over here (I'm also currently renting).

I've considered speaking to debt charities about what I can do about restructuring my credit card debts, and have thought about IVA's and bankruptcy but dont want to go there yet as I'm just about keeping my head above water (with no real quality of life as there's never anything left at the end of each month to save etc).

So I have two main questions:

1) Can I do something with my credit cards to freeze the interest and charges and agree with the CC companies a monthly affordable payment ?

2) I have spoken to one of them who has advised I can choose to "default" on the credit agreement. They will freeze the interest and charges and I agree to a monthly payment. But I am worried that this credit default will show up internationally and ruin my credit rating in America for the next 6 years if I decide to buy a house rather than continue renting.

3) If I manage to sell my house and clear the mortgage, should I use the 20k equity to clear the building loan, or use it as a deposit to buy a house in America and continue paying the building loan over the next 8 years until it's cleared ? This is something I could do but it very financially painful as it leaves me with little or nothing each month other than scraping by paying for food / petrol . household bills etc etc.

I realise the debt accumulation is all my own doing, and I realise I am stupid for running up so much debt. However at the time of taking out the building loan and with plans on emigrating to America I had y house valued at 70k more than it's worth now, which meant that when i came to sell it i would easily clear the loan and the credit cards as well as leaving me a nice sum to use as a down payment on a home in my new country of residence. Sadly all this has been blown out of the water with the global financial crisis, the UK recession and the hideous house price crash we've experienced in my home town in the UK where my house is.

Sorry for the rambling and lengthy post. It's taken me a while to build up the courage to post this and ask for help.

cos_2

I can't answer all your points, but remember that the credit reference agencies only report based on the companies that send information to them. UK companies (to the very best of my knowledge) do not send information overseas, so American CRAs will have no information from UK companies.

I appreciate that you're doing your best to pay this debt off - I hope this is one less worry for you.

NewCanuck

Thanks for your reply cos, much appreciated.

I have done some internet based research about international credit rating and credit scoring. Some of the information I have read says no it's not international, whereas some of the information (admittedly from forums and Q&A sites) says that the bank or institution that you are applying to for the loan / credit / mortgage *could* if they wanted to seek to look into your credit history / rating in the UK using Experion / Equifax and TransUnion.

I've terrified that if I do go down the road of agreeing a debt management plan with the UK credit card companies, and as a result "defaulting" on the credit agreement and this going on my credit file, that if and when I come to apply for a mortgage in my new home country, i.e. North America, that they'll run a credit check, see that I've defaulted in the UK and turn me down. The net result would be I continue to pay rent for the next 6 years (way more than mortgage payments) as well as the mental damage it will do to myself and my wife (and to be honest with you the stress of all this is already close to unbearable!)

cos_2

I understand your concern.

My wife's American and lives with me in the UK. We have family and friends both sides of the pond, and some have moved across. To our knowledge no CRAs have used info from outside their respective countries.

I believe that some international financial institutions can use inter-country info (HSBC, for example) but only within their own systems. I don't believe they share that info with international CRAs. (Yes, I know Experian etc. are international, but they work within national borders.)

I could, of course, be wrong

NewCanuck

Thanks again cos for your reply / updates. I just dont know what to do for the best anymore.

Might go and talk to one our local banks and see what they say.

What are your thoughts towards the repayment of the debts and the debt management plan options ?

cos_2

I'm not much good at debt advice, I'm afraid. I could only give a personal view and others might have much better advice.

For what it's worth, if it were me in your shoes, though:

a) Sell the house
b) Pay off credit card debt (assuming APR is higher than loan) immediately
c) Continue to pay down the loan, adding extra payments if possible (and allowable)
d) Continue to rent in the States, and look for cheaper accommodation if possible. I don't know where you are but it's often available - look online, check notice boards in stores, walk through suburbs and look for notices on doors.

Finally, I'd treat the debt situation without any thoughts to it being "left behind" - in other words, forget that you're in the US and simply treat it as a challenge to be addressed and eradicated. It's clear that you're not trying to skip your responsibilities.

I'm not a debt advisor at all - the above is just my first thoughts about what I might do.

Good luck.

InsideInsurance

Personally wouldnt run from it, whilst you may be in the US now you never know what may happen and you dont want to burn bridges.

Credit reference tends to be fairly geographically constrained but there is nothing to stop a potential lender for asking for additional information/ proof, particularly if you've only been in the country for a limited time.

Experian_company_representative

Your UK credit history is unlikely to be accessible to a US lender. I answered a similar question in my advice column a while ago.

James Jones

NewCanuck

Thank you to all the forum members who have posted responses and given me some advice. It is greatly appreciated.

I wonder what people's advice is regarding my quandary over 'to sell or not to sell'. And if so which debt should I clear with the equity as I can only clear credit cards or loan, not both.

Again, any comments, input, advice, opinion greatly appreciated.

NewCanuck

Experian_company_representative wrote: »

Your UK credit history is unlikely to be accessible to a US lender. I answered a similar question in my advice column while ago.

James Jones

Thank you very much James for taking the time to post a reply. It has set my mind at rest. Thank you.

crystal_clear

My personal thoughts would be to stabalise yourself 1st go into deafault with a reduced payment on CC and continue to rent then taking care of both the mortgage loan and reduced CC payments at this time. Leave selling for a while hoping the market will increase some while your getting yourself in a better position over in the USA financially to afford to buy and have a little extra funds available for a rainy day.

Just my thoughts on the question asked.

Crystal clear