Should you exhaust your credit line before immigration?

With immigration and moving abroad becoming a growing trend in Hong Kong, more and more people are starting to consider a new life in foreign countries by obtaining a bank loan or through debt collectors. Some of the most popular choices of countries for emigration include Britain, Canada, Australia, and the USA. In Hong Kong, residents’ credit reports are recorded under the sole consumer credit reference agency in town – TransUnion (TU). Upon obtaining your first-ever credit card or loan, your credit history will be stored and can be checked via a TU credit report - a statement that could greatly affect your finances if you reside in Hong Kong.

With the fact that TU is not an official credit reference being used worldwide, it is possible to escape by moving abroad with debts. If you are suffering from debts or simply wish to cash out more funds to settle the massive costs required for emigration, maxing out your credit cards or even getting loans before you leave the country may seem tempting, especially with an apparent loophole in the credit system.

Technically speaking, nothing happens right away when you leave the country with unpaid loans. However, you should expect that your creditor will continue trying to chase debt collections. Depending on the size of your debt, sometimes banks or big financial institutions will work with foreign debt collectors in your new country of residence. With this being an extremely costly decision, sometimes banks will opt to mark the amount you owe as bad debts if the amount is not sky-high. Additionally, leaving unsettled debts behind and escaping the city is not officially recognised as a criminal offence in Hong Kong.

That being said, despite how easy it may sound, moving abroad and leaving debts unpaid also come with a few problems that are less appealing and should be considered before you take action:

You might be using the same service providers

With Hong Kong being an international financial hub, you should keep in mind that most of the banks or financial service providers that you have been using or getting loans from run their businesses in other foreign metropolises as well. For example, HSBC, as one of the most commonly used banks in Hong Kong, is also well-established overseas and remains the second-largest bank in Europe. As so, if you are considering a move abroad to the UK or other foreign European countries with debts to your name, chances are you will come across the bank in many aspects of your life. Similarly, Citi Bank, with its headquarters located in New York City, is a banking powerhouse in America and Canada as well.

Although you would be able to build your creditworthiness from scratch once you move abroad, you are likely to fail if you are planning to apply for a card or foreign bank loan with no credit history. If you have excellent relationships with a few multinational industry players, it would be much easier for you to start with the application of a debit card or even a cross-country credit card - both ways would lead to communication with major issuers. Imagine how things could go if you tried to get away with unpaid loans from major banks who could, in fact, be your helping hand.

You could hardly come home again

If you are running away from unpaid debts, you would have to be gone for good and escape from your creditor. Keep in mind, though, if you plan on coming home to pay a visit to your family and friends who have not moved abroad, or to handle personal assets in Hong Kong, it would be very difficult. If you are only leaving the city temporarily, your creditors are likely to still have the right to chase debt collection or seize certain assets upon your return. Certainly, new beginnings in a foreign setting seem exciting, but can you really be sure that you won’t ever come home ever again?

It could affect your loved ones

For those who are looking to move out of the city without family members coming along, think twice before leaving bad debts behind. While it is difficult for banks to track you down overseas, your loved ones, especially those sharing the same home or office address, could face the repercussions of your actions. Oftentimes this can be a very harrowing experience for all. If you happen to have any assets in Hong Kong, they are at risk as well. While you may think that you are escaping from debts by moving abroad, it could prove detrimental for your loved ones. Leaving town does not necessarily mean leaving everything behind. Make sure you have taken risks into consideration before you make any decisions.

Debts could affect residency applications in some cases

Establishing residency in a new country is not easy. Most of the time, it requires thorough background checks and, most importantly, financial proof. To ensure you have sufficient funds to support yourself, governments often ask to see your financial statements, including bank statements, account balances, income proof and, on certain occasions, credit reports. In an attempt to escape debts, you are risking the rejection of your visa or passport application. It may be a challenge for you to explain or verify your income source to the authorities if you obtain plenty of cash. Financial soundness is a crucial factor for governmental decision-makers to grant residency to a foreign applicant. An example would be the “good character” tributes requested by the British Home Office when it comes to the British Citizenship (BC) application. They look at personal finance records as fundamental evidence for an applicant’s personality traits.

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