Do you know my friend Isaac? Fair Isaac that is. When people talk about their “credit score” in the USA (and who doesn’t, it seems to me) they are normally talking abut their FICO score. FICO is the industry abbreviation for the Fair Isaac Company, the most powerful corporation in the USA, bar none, in my view.
Fair Isaac is the partner/contractor of all three major credit reporting companies and their job is to develop a numerical score which, is in Wikipedia’s words:
… A credit score is a numerical expression based on a statistical analysis of a person’s credit files, to represent the creditworthiness of that person, which is the perceived likelihood that the person will pay debts in a timely manner. A credit score is primarily based on credit report information, typically sourced from credit bureaus / credit reference agencies. …
Several other developed countries such as Austria, Australia, Canada, Germany, Sweden, the UK and many others all have some sort of credit score system for their citizens or permanent residents who make financial transactions “in country”.
In the US, in particular, FICO seems a two-edged sword. there’s no doubt your FICO “number” is important, but there are also a lot of people who seem obsessed with it lately … it’s really hard to say who is totally right about the overall importance of a person’s FICO on a day-to-day basis.
Well, I have what is either good news or bad news … depends on how important your FICO (or home country equivalent score) is to you. If you decide to move to the Philippines you will never encounter Fair Isaac or any other their other country equivalents here.
Philippine banking privacy laws are among the most rigid on earth. They rival or even exceed the level of privacy of Swiss banks, Cayman island banks and others.
A bank who issues a credit card to you here in the Philippines basically can not report your credit history to anyone. Your credit here (or lack of same) is strictly between you and your bank. Want to do business with another bank? Fine, it’s always advisable in my view to have more than one, but you will start again from day one … like a high school kid getting his or her first car loan. There is no sharing or reciprocity of reporting between banks … indeed any “leakage” of customer’s data can prove to be a very nasty criminal prosecution issue, as well as a civil court matter that can drag on for decades.
The Philippine government has, for years now, had enabling legislation “on the table” that would allow credit reporting, but politically speaking it can only be done by a government agency, and no government agency has so far volunteered to do it, so the legislation is essentially dead.
So if you have a “prestigious” FICO score back in the USA, good for you … but don’t expect it to open doors or provide any discounts on loan rates and such here.
If you happen to have a low FICO score, that’s dandy too. It doesn’t matter if you earned the low score by recklessness, misfortune or even mistakes on the part of the credit agencies … it just doesn’t matter. No one in the Philippines really cares about your FICO score and it has nothing to do with daily life here. Just a little aspect of “culture shock” you may not have considered.
A tip from a layperson … always consult professionals in financial matters … if you do care about your FICO score and you think there is any possibility at all you may return to the US to live, I recommend you don’t do anything that would “burn your bridges”. Keep at least one US credit card “alive” with a US billing address and use the card 9responsibly. of course) on an occasional basis so that you still have a credit score if you ever return. You won’t lose or gain credit score points based on any Philippine financial transactions, they are not reportable anywhere (the US IRS may be an exception to the rule ;-))
Hi Dave,With the ammount of personal info that gets lost or mislaid here in the UK,which now seems to be a monthly occurence, since govt here contracted out such work,many here would welcome going back to strict privacy laws.The most recent being the loss of a disc containing 50000 personal employment records that included salary details and Ni numbers of Prison Officers. The incompetence of some organisations is mind boggling,an absolute gift to criminals involved in identity theft or illegal migrants,regards Chas.
Hi Dave,In addition to my previous post we now find out most of these discs/sticks are not even encrypted,so can be easily be read by those in posession,regards Chas.
Dave
America lives by the FICA score and this is one of the reasons our banking system is taking some big hits. As for me I like the saying to never borrow money for something that does not make you money. Also if you have a bad FICA score and need a loan you can still get a loan that is secured with a bank that will do manual under writing.
Dave: Just went through explaining this concept to Rebecca last week. One of the cultural differences between us is the perception of credit and how to use debt to further your goals. In particular, it took some heavy explaining when related to the fish pond business that debt can actually be a good thing when it comes to business. That being said, her frugality sometimes has reined me in when I get a bit carried away.
Also, wise words regarding not burning one's bridges in the States. The IRS has long tentacles and an even longer memory. Those debts do not simply "disappear" just because you leave the country. I had a colleague several years back in the Bahamas who owed the IRS over $1mm. They couldn't touch him in the Bahamas, but when he went home for his father's funeral, he was arrested at Miami airport on arrival, and still missed the funeral.
@Larry: Hi Larry, thanks for your comments. My point is just that your FICO score means nothing in the Philippines. One slight clarification, lest someone read the comments and not the main article. I am not talking about FICA .. the Federal Insurance Contributions Act (FICA) which is deducted from salaries for unemployment insurance. I am talking about FICO scores, FICO is an industry acronym for the Fair Isaac Corporation, nothing to do with any government agency. Don't man to be picky, but people mayread in a hurry and get confused.
@CHAS: Hi Chas, thanks for dropping by and commenting. Indeed the collection of all this data is dangerous in itself. This is one of the reasons the Central Bank, who was talked about as the agency who would run a Philippine credit reporting system, feels they can not safeguard the data and thus does not want to be the collection agency.
Dave interesting article, I do have one question on your last comment :
(the US IRS may be an exception to the rule ;-)) does the RP report this? and if so what information does the bank require from you to accuratly report this to the IRS? I have heard reports that setting up a internet paypal account to receive payments overseas can be a way to avoid taxes on internet purchases….not that I would do this mind you, I feel Uncle Sam should get more than 42% of my hard earned dollars …
@Brian: Hello Brian, thanks for reading and commenting. RE your question, I do not believe Philippine banks report anything to the IRS. My Philippine bank certainly has no information which would let them do so (SSAN, etc.). I don't know anything at all about this authoritatively, though. There certainly is a tax treaty between the Philippines and the US, you can Google it and see what it says for yourself. (or seek guidance from a tax professional, if you're in the 42% tax bracket that would be strongly advisable). My reference to the US IRS is based on the law that all US citizens must report _all_ income to the IRS … what my fellow US citzens chose to do about that law is of no concern to me.
Paypal is a US corporation so I am sure they comply with all US laws. Now, could an individual claim to Paypal that s/he was a citizen of another country … or use some other technique effectively and safely? Beats the dickens out of me. All my income is from US sources and is reported … but there must be ways to avoid some of it … but for the pittance I pay, compared to the pensions I draw, I just file and forget, I'm way ahead of the game. The IRS, along with Dick Cheney's shotgun, is high on the list of things I am afraid of 😉
Dave thanks forthe reply , insofar as our wonderful GBW & DC, I fear them more than the terrorists.
@Brian: Brian, if I may show my ignorance (why not, I do it all the time LoL), what is a GBW … my guess is a typo transposition of GWB? Goodness knows I share you fears, our beloved country has never before shied so far away from the Constitution or descended into the kinds of things I served for 38 years to eliminate … but I want to be very careful not to sidestep to US (or Philippine for that matter) politics … so please, no "I love Mr. Bush or I hate Mr. Bush" responses, folks , k?