Sending money abroad has become increasingly common, we’ve all at one point needed to, if not regularly. When sending funds to support family overseas, pay for international services, or just invest in a global market, the ability to quickly and securely send money across borders is essential.
However, a question often arises: Can sending money abroad impact your credit score?
The short answer is: Generally, no.
Sending money abroad, whether through a bank or a money transfer service, doesn’t directly affect your credit score as maintained by credit reference agencies in the UK.
Here’s why:
Credit Scores and Credit Reports: Your credit score is a numerical representation of your creditworthiness, calculated based on information in your credit report. This report details your borrowing history, including credit cards, loans, and mortgages. Sending money abroad is not a form of borrowing and isn’t included in your credit report, so it doesn’t directly influence your score.
The Distinction Between Credit Reports and Bank Statements
While sending money transfers doesn’t directly affect your credit score, it may appear on your bank statement. Credit reference agencies in the UK don’t typically access your bank statements directly. However, they might request them in specific situations, such as if you apply for a significant loan or mortgage.
In such cases, having a large number of international money transfers on your statement could raise questions from lenders. They might want to understand your financial situation better and the purpose of these transfers. This doesn’t necessarily mean your credit score will be negatively impacted, but transparency and clear explanations can be helpful.
Understanding Credit Scores in the UK
Credit scores in the UK are numerical representations of a person’s creditworthiness. These scores are calculated by credit reference agencies (CRAs) based on your past financial behavior, such as your history of borrowing money and repaying debts on time. A higher credit score generally indicates a lower risk of defaulting on future loans and can unlock access to better interest rates and loan terms.
The UK has three major CRAs: Experian, Equifax, and TransUnion. Each CRA uses its proprietary scoring model, but they all consider similar factors when calculating your credit score. Some of the key factors include:
- Your credit card history: This includes your credit card utilization rate (the amount of credit used compared to your credit limit), payment history, and any missed payments.
- Loans and other debts: Your loan types, outstanding balances, and repayment history all play a role.
- Electoral roll registration: Being registered on the electoral roll helps establish your identity and residency history, which can positively impact your score.
- Public records: County Court Judgments (CCJs) and Individual Voluntary Arrangements (IVAs) can negatively affect your credit score
Indirect Effects to Consider
Here are some indirect ways sending money abroad could potentially impact your credit score:
- Using a credit card to send money: If you choose to send money abroad using a credit card, be aware of the high fees and interest rates often associated with such transactions. These charges can accumulate quickly and lead to credit card debt. High credit card utilization (the amount of credit used compared to your credit limit) can negatively affect your credit score.
- Missing loan repayments: If you rely on funds you plan to use for loan or credit card repayments to send money abroad instead, this could lead to missed payments. Late or missed payments are reported to credit reference agencies and can significantly damage your credit score.
Sending Money Wisely
While sending money abroad doesn’t directly impact your credit score, here are some smart practices to keep in mind:
- Choose a reputable money transfer service: Look for services known for competitive exchange rates, transparent fees, and secure transfer processes.
- Plan your transfers: Factor in any associated fees when budgeting for international money transfers. Avoid using credit cards with high fees unless necessary.
- Maintain a healthy credit utilization ratio: Aim to keep your credit card balance well below your credit limit. This demonstrates responsible credit management to lenders and helps maintain a good credit score.
Sending Money Abroad with Confidence
By understanding how sending money abroad affects your credit score and following smart practices, you can ensure your international transfers are a smooth and financially responsible experience.
Remember, reputable money transfer services prioritize transparency and security, allowing you to send money with peace of mind.
Ready to send money abroad securely and conveniently? ATLMoney offers the best services.