How to build your credit score in U.S.A?
So you have your apartment, you’re working and you made a decision about whether to get a car. How do we start spending money on the fun and convenience of life? Now I haven’t talked about which banks to set up a checking or savings account, as that really for me was based on location. Can I get to the bank to withdraw money, if yes, then for now we are good! Now if you just moved to the USA, getting a great credit card may be difficult. Most American banks don’t take into account your credit history in other countries, but this changed last month when American Express announced it would access other credit histories in 5 other countries to help with the approval process. This would have been great for me in 2016, but regardless there are other ways to help build this score. Let’s begin!
1. Transfer your credit score
The first thing you can do is try to transfer your credit to the USA using Nova Credit. They create a global Credit Passport that helps people bring their credit history with them when they move to America. Nova Credit partners with different lenders and help provide the information from your international credit passport. This will make it easier to get approved. Now I never used this service, and the Bank of America credit card which I applied for when I opened my checking account was approved (it was thought that it was because I was from the U.K but in hindsight it may have been because of the large cash I deposited) but this is something that I wish I had known about. These are some of the credit cards which I seem to be able to apply for had I just moved from the U.K based off their website.
- American Express Green Card
- Blue Delta SkyMiles Credit Card
- Hilton Honors American Express Surpass Card
- American Express Gold Card
- Gold Delta SkyMiles Credit Card
- Hilton Honors American Express Card
- Blue Cash Everyday Card
- The Platinum Card
- American Express Cash Magnet Card
- Blue Cash Preferred Card
2. Secured Credit Cards
What is this? A secured credit card is a credit card that is backed by a cash deposit from the cardholder. This deposit acts as collateral on the account, providing the card issuer with security. Now this was something I was going to do willingly back in 2016, but it turned out I didn’t need this. Generally the limit on the card is the amount you paid as a deposit. Make sure that the issuers are providing this proof of reliable payment to one of the three main US credit bureaus, Equifax, Experian or TransUnion, as this is what is needed to build up your score. I would always go in person to banks, as a face to face interaction can go a long way in helping wit these applications.
3. Establish a Checking/Savings Account
Before selecting a bank, consider your priorities. I briefly touched on this in an earlier post, but things to consider are, if the ATMs are accessible, are the staff genuinely friendly and reliable, and what are the fees? Of course, being sensible is another thing, an overdraft at this stage can be disastrous. You need a checking account for direct deposit so this is something that is compulsory anyway.
4. Guarantors
This helped with getting an apartment when I first moved (although I later found out that my work would send a letter of good standing to my apartment’s resident office) and can also help with your credit. Make sure it is someone you know and trust, and they should also know what they are getting into. Essentially you are benefiting from their good credit history and they are acting as a safety net.
5. Maintain Good Credit Etiquette
You’ll begin building credit as soon as you have a credit product (which doesn’t just include a credit card) that reports to the main credit bureaus. Pay your bills on time to demonstrate your trustworthiness and this will build a good credit history. Don’t go overboard but paying with your credit card as much as possible and paying it off straight away is the best tactic. Another critical factor in your score is your utilization: generally you shouldn’t use more than 10% of your limit. Always check your payment due date so you don’t miss a bill. This is critical.
After a few months, you should slowly increase your score, and ways to monitor this are using websites like Credit Karma, which is what I use. If you are lucky enough to get a non-secured credit card, we can then discuss the other possibilities. You will start to get offers in the post (most of which don’t have many perks) but that is usually a sign that you are heading in the right direction. Note some retail credit cards are generally easier to obtain, but they have big fees if you miss payments, and generally the superficial perks may seem eye catching initially but you can usually get better deals without using their credit card (I have a Macy’s credit card that sucked me in with the 20% off everything for the day I opened it).
I hope this was helpful and this can apply to even students who are starting to establish their credit. Good luck penny pinchers!