credit score

 

When I arrived in the U.S, I was introduced to a financial system that I had never experienced before.One of my first financial lessons was on credit scores.I came from a society that required using cash on almost any transaction.Debit and credit cards were seen as tools for the rich,and there were no credit scores in use.Most of us believed that “Cash was King”. I didn’t understand why lenders in the U.S wouldn’t extend credit to someone who had cash.

If you are coming from a country where you were lucky to establish some credit,it’s still difficult for U.S lenders to access your existing credit reports because cross-border data laws often keep credit information from a foreign country from being exported to the United States,” says David Rubinger , spokesman for Equifax, one of the United States’ three credit reporting agencies.

What is a credit score?

In the U.S, a credit score is a numerical expression of how well you are likely to handle credit based on information that’s been sourced by credit reporting agencies.Your credit scores determines whether or not you’ll be approved for a credit card,vehicle loan or apartment.

Where do you start?

The credit score system and how it works can be very confusing to most of us.I will only talk about the basic steps needed to start and establish your credit.Most of the people moving to the U.S don’t take the time to learn about the credit system and how it affects their financial life.I signed up for my first credit card with a low limit of $500 during my first week in college – and in the U.S. I did not take time to learn about credit cards before applying for one.

There were several banks advertising on campus for new bank accounts and credit cards.I had no business signing up for a credit card without any income.(But hey ,I couldn’t refuse “free” money when offered to me).This led to me getting more credit cards, a down spiral wallowing in debt and finally jeopardizing my credit score.

Here are some tips for anyone looking for a way to establish and maintain good credit in the U.S

1.Your credit score is tied to a social security number. Most lenders will require a social security number to check your credit when you apply.If you need more information about how to obtain a social security number,visit http://www.ssa.gov/pubs/EN-05-10096.pdf

2.Get a secured credit card.When you open a bank account,ask your bank if they can offer you a secured credit card.With a secured card, you leave money in a deposit account with the financial institution as collateral for your credit card. (Your credit line is generally equal to the amount you have on deposit, so this means there is less risk for the financial institution if you don’t pay.)

Start with a small amount,usually $ 500 and ask upfront if the payments will be reported to the three major credit reporting agencies (  Experian Equifax and TransUnion )

3.Talk to companies with which you already deal.If you have a credit card from your home country issued by a company that also issues cards in the US, you might try finding out from them whether they can issue you a US-based credit card.

4.Get a cosigner. If you have a family member or friend who has already established credit in the U.S., you can ask them to cosign on a new loan or account for you. However, do not be offended if they say no, because there are pitfalls. Your cosigner will be liable for this debt if you can’t pay. And if you miss any payments, those late payments will hurt your cosigner’s credit as well as yours. (Late payments can be reported for seven years.) So it’s essential that you pay on time each and every month.

5.Store cards.You can try applying at local stores like Target,Walmart,Kohl’s, Macy’s, J.C Penny etc.Also check with your local gas station for a gas card.These cards are relatively easy to get.Once you have some of these cards (Don’t get too many),pay off the balance completely every month.

Before you get these cards,ask whether or not they report to the credit bureaus.Otherwise there is no point especially if you are trying to establish a credit history.

Once you have established good credit history and have a proper credit card,cancel all the store cards.They typically have high interest rates,most can be used only at the issuing store and they entice you with rewards,discounts and special offers in order to spend more.

Conclusion

You need to go step-by-step: get a Social Security number and a US address; get credit even if it means getting a secured credit card or store card; and pay your bills on time every month. Once you have a credit reference under your belt for at least six months, do it all over again.

Keep the balance at 50 percent or less of your total credit card limit for the card.Having credit makes it easier to get more credit, but having lots of credit isn’t always ideal.It shows lenders that you may be over extended with your debt obligations.

Lastly, once you have a credit-building regime in place, don’t forget to check both your credit report and credit score at least once a year.Ensure that everything reflected on the report is accurate.You can check your credit report for free at www.annualcreditreport.com