How to get a credit card and build a good credit history
Build a good credit history will have every Russian immigrant in the United States, even those who do not plan to never take loans. ForumDaily understood the nuances of why credit rating is important for all aspects of life, how to get a first credit card and how to “clear” the non-payment history.
What is a credit history and credit rating
Almost all of America lives on credit. This is the way most often people buy houses, cars, and summer cottages, they pay for university and college tuition. Even daily expenses in the USA are often paid by credit card.
For those who come to America, it can be quite difficult to restructure. If in the homeland the absence of debts and credits is considered an indicator of stability, then the opposite is true: if you don’t take anything on credit, it will be very difficult to prove your integrity. It must, however, be remembered: it is important not only to take loans, but also to pay for them on time.
Credit history is, in essence, proof of your reliability and solvency. The more scrupulous you pay your loans, the better your credit history. The better the credit history and the longer it is, the lower the interest on future loans.
In addition, as shown CNN study, landlords and employers pay attention to credit history. According to statistics, one of four Americans who want to get a job, check in the credit bureau.
Credit history is reflected in the credit rating - the so-called Credit score. This is one of the most important indicators of a person’s financial reputation. As a rule, the rating is expressed in numbers from 300 to 850. Accordingly, the higher the rating, the greater the chance of getting a loan on the best terms
The construction of a credit history, as a rule, begins with the receipt of the first credit card. However, this is very difficult to do. A person falls into 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.
At the same time, it doesn’t matter what relations you had with banks outside the United States.
Information on the loans paid back home cannot be used to appease the bank and get the coveted credit card. For the same reason, arrears abroad will not affect your credit history here.
America does not have access to such data. There is only one exception to the rule - American Express Bank, which issues credit cards to those who already had credit or deposit accounts in their local branches at the local branches of this financial giant.
Everyone else will have to sweat a bit to build a good credit history from scratch. ForumDaily collected several ways to do this.
1. Get a prepaid (guarantee) credit card
This requires a passport, social security number SSN and proof of legal residence in the country (visa or green card).
The principle of its operation is as follows: you put a small amount ($ 200-500) into your account, and then treat your funds as if it were a loan. That is, if you spend money, you regularly top up the card to the original amount.
Maybe this option: the bank gives you a small loan (from $ 300), but you have to deposit a certain amount on the account - this will be a guaranteed deposit if you suddenly stop paying.
Then the bank looks at how well you can manage your finances. In six months or a year, it will be possible to get an already standard credit card.
As a rule, banks like you not only to open a prepaid credit card with them, but also to have a previously opened deposit account. Although there are nuances here.
Katya (she asked not to give her last name) arrived in the United States on a work visa. She has been a Chase bank customer for over a year and has a solid account there. However, when she wanted to get a credit card, the bank refused, because she is a citizen of another country and does not have the status of a permanent resident. Moreover, Chase refused to issue even a guarantee credit card. Katya turned to Bank of America, opened a deposit account there and asked for a prepaid credit card. She was immediately issued without any problems. “Bank of America easily opens a prepaid card ranging from $ 300 to $ 1000. I opened a credit card with the smallest amount, I only need it to start a credit history, ”explains Katya.
2. Get a credit card if you have a large bank account
Some banks may issue a credit card to their customer even without a test prepaid credit card. The main condition - the presence of a substantial savings or checking account (how to open an account and what is needed for this - we told in one of the previous articles). This possibility is the exception rather than the rule, but it can also be remembered.
Lena from Kiev lived in the United States for just under a year. Immediately after the move, I opened a bank account in Bank of America, a little later - a savings account. During one of her visits to the bank, the employees themselves offered her to apply for a credit card, although at that moment she did not even have a social security number. The application was approved, the bank issued a credit card with a limit of $ 1000. “Everyone is surprised when I tell you how I got a credit card, and they say that it is impossible,” Lena laughs. - But, apparently, the bank considered me a trustworthy client. For all the time when I had open accounts, I mostly replenished them, and did not withdraw money. ”
3. Become a second credit account holder
The owner of a credit card can give permission to use it to any person - a relative or acquaintance. Svetlana Sultanova, 62, a native of Baku, was helped by her daughter to start a credit history. “She added me as the second user of her American Express card. About six months later, I myself began to receive offers from other credit companies, ”she says. The important thing to remember here is that the primary cardholder must pay with their credit card on time.
4. Get a credit card at a gas station or major stores.
For example, it could be Macy's, Target, JC Penny, Kohls and others.
The main requirement is a social security number and a permanent source of income. Retailers can give both a prepaid card and a regular credit card. The only thing - it will be possible to use it only in stores or at gas stations of this particular network. The amounts spent from the card must be regularly replenished.
5. Buy a car on credit for a special program
The following method of building a credit history with credit cards is not connected. You can begin to prove to the state that you are a trustworthy citizen by buying a car on credit. A number of car dealers have special programs for those who do not have a credit history.
“We have a program for newly arrived immigrants without 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, CEO of the car dealership. Mercedes-Benz Fletcher Jones Motorcars in Fremont, California. “To buy a car, a person must show a bank statement, utility bills, proof of income, and also provide a list of five to ten people who know the potential buyer - they will be called if he stops paying the loan.” According to Michael Bates, a car under this program can be purchased within one to two days. Applications for this type of car purchase can be left on car dealership site.
To build a credit history, a car loan is one of the most important stages.
You should not buy a car for cash in the USA - you will lose a good chance to improve your credit rating.
“I messed up my own credit history,” recalls Tetiana Banks, account manager at Citibank in Miami. “Immediately after moving to America, I bought a car for cash, but I had to borrow it.”
6. To buy household or home appliances on credit
In a large store, you can negotiate a purchase on credit of a TV or washing machine. In the form of a down payment, you will need to immediately pay most of the cost of the goods (70-80%). To obtain such a loan you need to have a social security number and proof of a stable income.
Five ways to keep a good credit rating
The main rule after you have opened a credit line, it is timely to pay bills. Monthly the bank sends an extract in which it says exactly when you should return the used amount. Moreover, the client has a choice. He can either pay the entire amount all at once (if you do this before the deadline, you don’t need to pay interest), or make a minimum payment in due time, and split the balance into parts and pay them monthly (interest in this case can reach 15-30% ).
ForumDaily gathered five basic rules, compliance with which will help build a good credit rating.
1. Pay all bills on time
Delay in payment, financial penalties and bankruptcy cause the greatest damage to the credit rating.
Irina Bogdanova, who uses credit cards, always adheres to this rule. “You may not pay the entire debt on the card every month, but the minimum payment must always be paid on time. You can forget to brush your teeth, but you should never forget about the bank payment. If you are even 12 hours late, you will be immediately punished: pay a fine, the interest on your card will immediately rise, and a dark spot will appear on your credit history, ”she says.
2. Check your credit rating regularly
If you notice any inaccuracy in your rating, immediately report to the credit bureau (about them in more detail - just below).
Julia from Ukraine has been living in the USA for more than five years. She and her husband suffered because of the error of the credit union, where the family took a car loan. At closing, they paid the rest of the balance, which the employee of the credit union called them. But next month, the credit union put them another $ 14 of debt, which the couple did not know about. As a result, the payment was overdue, the report went to the credit bureau, and the credit rating dropped from 750 to 690.
The credit union admitted the mistake, but it was possible to correct it only by appealing. The couple at this time just took a mortgage. Because of the downgraded rating at the bank, they were given a loan at 4,12%, although all their friends received less than 4%. One and a half months after the appeal, the credit bureau recognized the correctness of the couple and returned the rating to the previous position. Julia and her husband are now thinking about refinancing mortgages at a lower percentage.
3. Manage your debts wisely
Regularly review statements of the credit account that the bank sends, and if you have already reached your credit limit, do not use this credit card anymore.
4. Build your credit history
It is very important that your credit history with timely paid bills be long. In order to show that you can handle money responsibly, it is advisable not only to pay on credit cards on time, but also to try to deposit more than the minimum payment. In addition, it is important to pay all utility, medical and other bills on time.
5. Do not make a lot of requests for loans
Every time you submit an application, the lender looks at your credit report. If in a short period of time you have sent too many such requests, it means that you have already taken on a lot of debts or have financial problems.
Who considers credit rating
There are three credit bureaus: Equifax, Experian и TransUnionthat collect and store credit histories. Each of them has its own system of calculations, and therefore they can show a different credit rating. There is also a consolidated rating of the company. FICO, which created this scoring system. Also, some banks and companies are engaged in counting points, where you can find out your score.
Once a year, you can check your credit score for free in three ways: on the website Annual Credit Report, by calling 1-877-322-8228 or by sending a request by mail: Annual Credit Report Request Service, POBox 105281, Atlanta, GA 30348-5281 (the following information is needed: last name and first name, social security number, current residence address, previous address , date of birth, phone number).
Everything is fixable - even unpaid loans
Former Muscovite Alena arrived in California back in the 90s. Not understanding the essence of the credit rating at the time, she had delayed the payment of car loans by several months.
And one morning I simply did not find the car in the parking lot - it was taken by the bank.
She had to pay around $ 1000 to get the car back, but her credit history was already significantly damaged. Alena took eight years to improve it. But then the financial crisis struck, and the woman had problems with the payment of the mortgage. Her credit rating suffered again. Alena is still trying to clean it up.
After the 2008 crisis, many Americans lost their homes altogether after they stopped paying their mortgages or declared themselves bankrupt. This significantly worsened their credit rating. By the way, the candidate for the presidency of the United States, Donald Trump, also filed for corporate bankruptcy four times.
But in general, bankruptcy is an unpleasant process, but not fatal. As a rule, a bankruptcy record in a credit report is reset to zero after seven years. Therefore, in this case, to clear the history - you just need to wait. Moreover, if after a bankruptcy you regularly paid your bills, your credit rating may even slightly increase, which will allow you to get a car loan or a mortgage. However, percentages are likely to be above average.
If you just have late payments, you can try to correct the situation. For this you need:
1. Check for errors in your credit report. You can do it here.
2. Set up reminders for current payments. A number of banks provide this service.
3. Stop using credit cards.
4. Begin to pay your debts, and it is desirable to first pay those bills for which the highest loan rate is established. Each time you need to make an amount in excess of the minimum payment.
5. If you cannot make ends meet, contact your creditors and discuss possible options with them.
IMPORTANT ADVICE: You can dispute in writing overdue payments that hang on you. If the bank or collection company does not respond within 30 days after receiving your letter, the credit bureau is required by law to remove this debt from the credit report.
Alyona from California, the one from whom the car was taken away, does just that. She regularly wgoes to the site scoresense.com, looks, what debts are behind her are listed: something pays something, something disputes. However, its credit rating has not yet risen to a good level.
Special companies are also engaged in the restoration of the credit rating. For their services, they charge $ 600 and more. The whole process takes about six months.
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