Credit History in America

The banking system in the U.S. and the savings banks of the former Soviet Union are "two big differences. Even with an account in an American bank in Russia (e.g., Citibank), a Russian person will discover a lot if he or she wants to open an account and build a successful credit history in America. Forum tried to figure out how best to approach this process, what to keep in mind, and what pitfalls may be encountered.

Opening a bank account

Seemingly the easiest operation. But it is not that easy. To open savings and checking accounts at the bank you need a Social Security Number (Social Security Number or SSN) and proof of address in America (utility bill, contract to rent or buy a house). Then, really, twenty minutes of your time - and you have the file with the bank contract.

It's the same with opening a credit card. You choose a package, present your ID, such as a driver's license, which is scanned - and the card is mailed to you a week later.

If you don't have SSN, then a passport with a visa and proof of address in Russia/Ukraine/Kazakhstan etc. will do. At Citibank, for example, require a scan of your payments for the last month. Then you can open a debit card, which bind to the current and savings accounts. At Bank of America, you can immediately open a savings account for children, where you need to put $300 (or more) or make a monthly payment of $25 until the amount reaches $300. Wells Fargo is the friendliest bank to foreigners and allows you to open an account with only two pieces of identification (for example, passport and driver's license).

Checkbook

Only in the movies can the hero write a check for a million dollars without looking, in reality you have to be careful with the checkbook. First, you should always be sure that the account to which the checkbook is attached has money in it. It sounds ridiculous, but in fact the bank charges about a $35 fine if the person you wrote the check to deposited it and there is less money in the account. Secondly, when the account or card is blocked, the check system is also blocked, that is, if you pay, for example, electricity by check and automatic payment system by phone, and when you write off it turns out that the account is not available, the bank again takes a penalty, also about $35, different banks are different. Also, you should never leave your checkbook anywhere, because anyone can fill it out on your behalf. It is always better to know exactly how much money in the account, for this you can always check the account balance in the application on the smartphone before you write a check. So you don't have to run to top up your account with cash or transfer from another card.

Starting a credit history

In case you have absolutely no credit history in America, you need to start building one. As soon as possible. It is also possible to get what is known as a secure credit card (secure credit card). At the bank where you already have a debit card, you must open a new card with at least $300 (preferably more) and a maximum of $10,000, and use the money as credit.

It is not recommended to use more than 50% of the funds, and you need to repay the debt immediately. There is an "automatic repayment" feature from the debit card. After a few months (usually six months) the bank will offer a standard credit card. After a year, you can apply for a car loan. In two to three years, provided there are no delinquencies and you have a steady job, you can get approved for a mortgage.

Credit History of Foreigners

To build a good history in America it does not matter what kind of relationship you had with banks outside the U.S. The only bank that can send your credit history information is American Express, and then if you have had an excellent credit history outside the U.S., you can get a loan in America for a fairly large amount at once.

The most favorable banks for foreigners are Chase, Wells Fargo, TD Bank, Bank of America, and Citibank. The others require Social Security and an existing credit history.

Who Counts Credit Scores

FICO, which created the scoring system, as well as three credit bureaus: Equifax, Experian and TransUnion. There are also several other banks and contractors that calculate credit scores.

Credit Score

The types of points are as follows: classic bank cards, personal financing, mortgages, auto loans, and NextGen points. The classic score ranks from 300 to 850. For example, in 2013, 37% of banking users had between 750 and 850 points. FICO scores for bank cards range from 250 to 900. FICO scores on mortgages, respectively, range from 300 to 850. The higher the score, the less risk the bank has, and the better the customer's ability to pay.

There are four types of scores: 1998 (FICO 98), 2004 (FICO 04), 2008 (FICO 8), and 2014 (FICO 9).

There are three ways to check your FICO score for free once a year: online at AnnualCreditReport.com, by phone at 1-877-322-8228, or by mail to: Annual Credit Report Request Service, P.O.Box 105281, Atlanta, GA 30348-5281 (information you need: full name, Social Security Number, current address, previous address, date of birth, telephone number).

How your credit score is calculated

• 35% is payment history, namely whether or not there are delinquencies, penalties, refinances, bankruptcies, foreclosures, property auctions, foreclosures, and deferred payment petitions. The more, the worse it is for the payer and his or her history.

• 30% - debt obligations

1) credit card debt(s). This so-called "revolving utilization" is calculated using the following formula:

credit card balance / credit card limit x 100%.

The higher the percentage, the lower the borrower's credit score.

2) Fixed payments, such as a car loan (that is, a fixed monthly payment over 36, 48 or 60 months. Usually, the collateral is the item itself for which the payment is made.

3) open-ended debt; fairly rare, the most typical being the American Express Green Card.

15% is the statute of limitations. The earlier the credit history began, the more stable it is considered.

10% - diversity of credit "basket" (account diversity): the more different current or repaid loans (car loan, mortgage, home equity loans, etc.), the better, it means that the person is able to manage their finances in different areas.

10% - requesting new loans (inquiries). Every time a borrower wants to take out a loan (even a point card at the supermarket), a request is sent to the credit bureau, where these requests are stored. The fewer inquiries (especially rejected ones), the better.

Auto Loan

It is better to forget about the advertising posters of car dealerships with the magic interest, it's all a scam or designed for those who have already been fully paid the cost of several cars. If there is a down payment of 30-50%, then there shouldn't be any problems with getting an auto loan. It is better to refrain from the temptation of buying a car for cash from the dealer or craigslist and use the services of a bank. Car loans can be paid back quickly, and your credit history can be improved.

Mortgage

If you already have two years of uninterrupted (and necessarily good) credit history and a steady job, you can think about buying a property. As a rule, when you choose a house or an apartment, you can find out whether a mortgage is pre-approved based on your credit score. You can even do this on a real estate website, such as zillow.com.

Implications

In America a lot of goods and services are bought on credit. As credit has become more readily available to the public, banks and financial institutions have more risk. Accordingly, this is what the standard credit point system was introduced for. As described above, it is best not to ask for your credit score too often, this can lower your overall score, as it will indicate that the person needs new credit, meaning they are not in a very good financial position. Also, the interest rate on a new loan can be significantly different for people with "good" and "bad" credit histories. And the most important thing is to pay everything back on time.

A recent study by CNN showed that even insurance companies, landlords and employers are now paying attention to credit history. Statistically, one in four Americans who want to get a job are checked by the credit bureau. Administrative agencies have tried to intervene by recommending that they first obtain a candidate's consent to the processing of their data, but no one can interfere with an employer's decision to refuse to hire them.