How to get a credit card and build a good credit history?

Building a good credit history is something every immigrant in the U.S. will have to do, even one who never plans to take out loans. ForumDaily looked into the nuances - why a credit score is important for all aspects of life, how to get your first credit card, and how to "clean up" a history of non-payment.

What is credit history and credit score

Almost all of America lives on credit. That's how people most often buy houses, cars, and vacation homes, and pay for college and university tuition. In the United States even your daily expenses are often paid by credit card.

This can make it quite hard for newcomers to readjust. If in your homeland the indicator of stability is absence of debts and credits, here it is vice versa: if you do not take credit - it will be very difficult to prove your good faith. However, you should remember: it is important not just to take credit, but to pay for it on time.

Your credit history is essentially proof of your reliability and ability to pay. The more diligent you are about paying your loans, the better your credit history. The better your credit history and the longer it lasts, the lower the interest on future loans.

In addition, as the CNN study found, landlords and employers pay attention to credit history. Statistics show that one out of four Americans looking for a job is checked by the credit bureau.

Credit history is reflected in the credit score, or Credit score. It is one of the most important indicators of a person's financial standing. Generally, the rating is expressed in figures from 300 to 850. The higher the score, the better your chances of getting a loan on better terms.

The first steps

Building a credit history usually begins with getting your first credit card. However, it is not easy to do so. A person is caught in a vicious circle: the bank does not give a credit card because there is no good rating, but at the same time it is impossible to build a high credit rating without using credit cards.

It does not matter what kind of relationship you have with banks outside the United States. You cannot use your credit history from your home country to placate a bank and get the credit you desire. For the same reason outstanding debts abroad will not affect your credit history here.

America has no access to such data. There is only one exception to the rule - the bank American Express, which gives credit cards to those who have a home were credit or deposit accounts in the local branches of the financial giant. Everyone else will have to work a little harder to build a good credit history from scratch. We've put together a few ways you can do it.

1. Get a secured credit card.

You need your passport, social security number (SSN) and proof of legal stay (visa or green card).

How it works: you put a small amount of money ($200-500) on your account, and then handle your money as if it were a loan. That is - if you spend the money you regularly replenish the card to the original amount.

It may be the following option: the bank gives you a small loan (from $300), but you have to put a certain amount on the account - it will be a guaranteed deposit if you suddenly stop paying.

Next, the bank looks at how well you can manage the finances. After six months to a year you can get a standard credit card.

As a rule, banks like you not only open a prepaid credit card from them, but also have previously opened a deposit account. Although there are nuances here, too.

Kat (she asked not to disclose her last name) came to the U.S. on a work visa. She has been a client of Chase Bank for more than a year, she has a solid account there. However, when she wanted to get a credit card, the bank refused her because she is a citizen of another country and does not have permanent resident status. Moreover, Chase refused to issue even a guarantee credit card. Katya went to Bank of America, opened a deposit account there, and asked for a prepaid credit card. It was immediately issued without any problems. "Bank of America easily opens a prepaid card ranging from $300 to $1,000. I opened a credit card with the smallest amount, I only needed it to start my credit history," explains Ketty.

2. Getting a credit card with a large bank account

Some banks can issue a credit card to their client even without a trial prepaid credit card. The main condition is to have a substantial savings or checking account (how to open an account and what you need for this - we told in a previous article). This possibility is the exception rather than the rule, but it too can be kept in mind.

Liza has lived in the United States for less than a year. She opened a checking account at Bank of America right after she moved here, and later opened a savings account. During one of her visits to the bank, they suggested that she apply for a credit card, even though she did not have a Social Security number at the time. The application was approved, and the bank issued a credit card with a $1,000 limit. "Everyone is surprised when I tell them how I got the credit card and they say it's impossible," laughs Liza. - But apparently the bank considered me a trustworthy customer. For all the times I had accounts open, I mostly funded them, not withdrew money."

3. Become a second credit account holder

A credit card holder can give permission for anyone - a relative or acquaintance - to use it. The important thing to remember here is that the primary cardholder must pay his or her credit card on time.

5. Buy a car on credit with a special program

The next method of building credit history has nothing to do with credit cards. You can start proving to the state that you are a trustworthy citizen by buying a car on credit. A number of car dealerships have special programs for those who don't have a credit history yet.

"We have a program for newly arrived immigrants with no credit history. They can buy a new or used car by taking out a loan from one of the banks we work with," says Mike Bates, general manager of Mercedes-Benz Fletcher Jones Motorcars in Fremont, Calif.

To buy a car, a person must show bank statements, utility bills, proof of income, and provide a list of five to ten people who know the potential buyer - they will be called if they stop paying the loan." According to Michael Bates, a car can be purchased under this program within a day or two. Applications for this type of car purchase can be left on the car dealership website. To build a credit history, a car loan is one of the most important steps.

6. Buying household or home appliances on credit

In a large store, you can arrange to buy a TV or washing machine on credit. You have to pay a big part of the price (70-80%) right away as a down payment. You need a Social Security Number and proof of a steady income to get this type of credit.

Five ways to maintain a good credit rating

The main rule once you have a line of credit is to pay your bills on time. Every month, the bank sends you a statement telling you exactly when you have to pay back the amount you've used. Moreover, the client has a choice. He can either pay the entire amount at once (if you do it before the due date, you don't have to pay any interest), or make a minimum payment in due time, and break up the balance into parts and pay them monthly (interest in this case can be as high as 15-30%).

1. Pay all your bills on time. Delinquency, financial penalties, and bankruptcy do the most damage to your credit rating. You may not pay all of your card debt every month, but you should always pay the minimum on time. You can forget to brush your teeth, but you can never forget a bank payment. If you miss even 12 hours, you'll be punished right away. You'll pay a fine, your credit card interest will go straight up, and you'll get a black mark on your credit history.

2. Check your credit rating regularly. If you notice any discrepancy in your rating, report it to a credit bureau right away (read more about them below).

Omelia has lived in the United States for more than five years. She and her husband suffered due to a credit union error where the family took out a car loan. At closing, they paid off the entire balance they were told by a credit union employee. The next month, however, the credit union charged them another $14 in debt that the couple didn't know about. As a result - the payment was late, the report went to the credit bureau, and the credit rating was downgraded from 750 to 690.

The credit union acknowledged the mistake, but the only way to correct it was to file an appeal. The couple was just taking out a mortgage at the time. Because of their downgraded rating, the bank gave them a loan at 4.12%, even though everyone they knew was getting less than 4%. A month and a half after the appeal, the credit bureau ruled the couple right and returned the rating to its previous position. Julia and her husband are now thinking about refinancing their mortgage at a lower rate.

3. Manage your debts wisely. Regularly review the credit account statements the bank sends you and, if you've already reached your credit limit, don't use that credit card again.

4. Build your credit history. It is very important that your credit history with bills paid on time be long lasting. In order to show that you can handle your money responsibly, it is advisable not only to pay your credit cards on time, but also to try to make more than the minimum payment. It is also important to pay all utility, medical and other bills on time.

5. Don't make too many credit requests. Every time you submit an application, the lender looks at your credit report. If you have sent too many of these requests in a short period of time, it means that you have already taken on a lot of debt or are experiencing financial problems.