June marks our sixth month as US residents, coming from a small European country right into NYC and one of our main concerns was how to build our credit history from scratch, as we have no credit activity here.
Weird enough, we did have debit cards since 2010, when we first visited the US, but this had absolutely no importance to the bank system, our financial activity, while pristine, didn’t account squat, since we never used loans.
Our accounts both had zero overdraft and, as 2 debt free people, we stayed away from loans as much as possible.
Do we really need credit history if we don’t want to take any loans yet?
Back at home, credit history means nothing, unless you had some bad history, which can be used against you, when trying to get a loan. Otherwise, even when looking to find a mortgage, the bank will calculate what you qualify to based on your monthly income.
If you never took a loan in your life (not impossible for people who are determined savers), it won’t affect the chances to get a loan, as it does in the US, where no credit history will come to bite you really bad.
Initially we laughed at this, since we don’t plan on getting any loans, as you can imagine.
There’s still so much to be done right now, as newly immigrants, and getting into debt doesn’t fit our initial financial plan.
But there’s no way to avoid building the credit history, even if you’re not into loans.
When we tried to secure a rent, they asked us about our credit history. Luckily for us, since we’re moving into a bigger home with a friend, her excellent credit score did the trick. Otherwise, we’d probably sleep under the Brooklyn Bridge.
No credit history, no credit cards. No credit cards, no credit history
In order to build credit history one needs to have a credit card and use it wisely.
But the banks won’t rush to give you a credit card since … you guessed … you don’t have credit history.
Catch 22 …
Initially, we went to Chase, where our checking accounts are. Almost a decade of history with them meant nothing, as our credit card request was denied.
Then we listened to some close friends of ours and tried a Macy’s credit card. Even Amazon credit cards. That’s how they started their credit history journey years ago.
We were denied.
Our friend signed the lease for us all, so our most pressing credit history issue is solved, but we do need it down the road.
So I took another friend’s advice and went to Capital One to get a secured credit card.
A secured credit card
I deposited $500 and now have a credit limit of $627 dollars.
The bank actually loans me just 127 dollars, since the half grand I deposited is kept as a ‘guarantee’ and I have to pay my balance from my checking account as if the money wasn’t there. I’m told that, after closing that secured credit card, I’ll get my initial $500 deposit back.
So the trick (bank’s trick) is that I’m given a credit card to ‘play with’, but it’s not the banks money, it’s mine.
Anyway, I started with a 665 credit rating after few days, it can only go up from here.
Get a job and you’ll soon get an credit card offer
Husband started with his job 3 months ago and, after about a month and 2-3 paychecks, he went back to Chase to request a credit card. Weird enough, he got one.
His credit limit is 1200, which is almost double the one I was given.
We’ll have to diligently pay our balance in full every month (we’re actually so scared of getting into any debt, that we’re paying it 2-3 times a month to keep it zero) and see our credit score slowly improve.