Credit history in america

The banking system in the United States and the savings banks of the countries of the former Union are “two big differences.” Even with an account in an American bank in Russia (for example, Citibank), a Russian person will discover a lot of new things for himself if he wants to open his own account and build a successful credit history in America. The forum tried to figure out how best to approach this process, what you need to keep in mind, and what pitfalls you may encounter.

Opening a bank account

It would seem like a simple operation. But not everything is so easy. To open savings and checking accounts at a bank, you need a Social Security Number or SSN and proof of your residential address in America (utility bills, rental/purchase agreement for real estate). Then, really, twenty minutes of your time - and you have a folder with a bank agreement.

It's the same with opening a credit card. You choose a package, show your ID, such as a driver's license, which is scanned, and the card is mailed within a week.

If there is no SSN, then a passport with a visa and proof of address in Russia / Ukraine / Kazakhstan and so on will do. AT Citibank, for example, require scan payments for the last month. Then you can open a debit card, to which the current and savings account is linked. AT Bank of America You can immediately open and savings accounts for children, you need to either immediately put $ 300 (or more), or make $ 25 monthly until $ 300 is reached. Wells Fargo It turned out to be the most friendly bank for foreigners and allows you to open an account only having two ID cards with you (for example, a passport and driver's license).

More details about all the nuances can be found in our previous article.

Checkbook

It is only in the films that the hero can write a check for a million dollars without looking; in reality, you need to be careful with the checkbook. First, you should always be sure that there is money in the account to which the checkbook is attached. It sounds ridiculous, but in fact, when there is a shortage of funds, the bank takes a fine of about $ 35, if the person to whom you wrote the check deposited it and there is less money in the account. Secondly, when blocking an account or a card, the check system is also blocked, that is, if you pay, for example, electricity using a check and an automatic payment system by phone, and when debited, it becomes clear that the account is not available, the bank also takes a penalty, too about $ 35, different banks in different ways. Also, the checkbook can never be left anywhere, because anyone can fill it on your behalf. It is always better to know exactly how much money is in the account, for this you can always check the account balance in the app on your smartphone, before writing a check. To avoid having to run to replenish the account in cash or transfer from another card.

Beginning of credit history

In case you have absolutely no credit history in America, you need to start building it. And as soon as possible.

Svetlana Sultanova says: “My first credit card was opened by my daughter, as a second person on her American Express credit card. About six months later, offers from other lending companies began to arrive.”

You can also make a so-called secure credit card. That is, in a bank where you already have a debit card, you need to open a new card, where to put at least $ 300 (preferably more) and a maximum of $ 10 000, and use your money as credit.

Aida Galliullina says: “I have such a loan from Wells Fargo. By the way, if you pay on time and have local documents, then after about six months the deposit will be returned.”

It is not recommended to use more than 50% of the funds, and you also need to pay off the debt immediately. There is an “automatic repayment” function from a debit card. After a few months (usually six months), the bank will offer a standard credit card. In a year you will be able to apply for a car loan. After two to three years, provided there are no arrears and you have a permanent job, you can get mortgage approval.

Foreigners credit history

To build a good story in America, it is completely unimportant what kind of relationship you had with banks outside the United States. So, even with overdue debts, for example, at Citibank in Russia, Citibank America cannot verify this. That is, information does not vary between banks of a single financial corporation or between credit bureaus, such as Equifax. The only bank that can send your credit history data is American Expressand then, if you had an excellent credit history outside the USA, you can already get a loan in America for a rather large amount right away.

“I started building my credit history with Capital One Bank. They give it to almost everyone online,” Alla Poryadina told the Forum, “and you will know the result right away. Before this, I didn’t have a quick loan at all. Thanks to this card, other banks began to issue loans. When the rate was at its highest, I took Discover. The option with a security card is also good, but as far as I know, the credit limit for such a card increases very slowly.”

The most loyal banks to foreigners are Chase, Wells Fargo, TD Bank, Bank of America, Citibank. The rest require Social Security and an existing credit history.

Who counts credit scores

Company FICO, which created this scoring system, as well as three credit bureaus: Equifax, Experian и TransUnion. Also, some other banks and contractors are engaged in counting points, by contacting which you can find out your score.

Points (credit score)

The types of points are as follows: classic bank cards, personal financing, mortgage, car loan, and NextGen points. Classic scoring ranges from 300 to 850. For example, in 2013, 37% of banking users had scores between 750 and 850. FICO scores for bank cards range from 250 to 900. FICO scores for mortgages, respectively, 300 – 850. The higher the score, the less risk the bank has, and the better the client’s solvency.

There are four types of points: 1998 (FICO 98), 2004 (FICO 04), 2008 (FICO 8), and 2014 (FICO 9).

Once a year, you can check your credit score for free in three ways: on the AnnualCreditReport.com website, by calling 1-877-322-8228 or by sending a request by mail: Annual Credit Report Service Service, POBox 105281, Atlanta, GA 30348-5281 (needed the following information: name, Social Security Number, current address of residence, previous address, date of birth, phone number).

How credit points are calculated

In the USA, Canada and many other countries, FICO is engaged in scoring. That is, it looks at the behavior of the borrower / payer. According to wikipedia.org the division is about the following:

35% — payment history, namely: the presence or absence of delinquency, penalties, refinancing, bankruptcy, placing property on the auction, imposing arrest on property, requests for deferment of payment. The more, the worse for the payer and its history.

30% — debentures

Three components:

1) debt on credit card(s). This so-called “renewable use” is calculated using the following formula:

credit card balance / credit card limit x 100%.

The higher this percentage, the lower the borrower's credit score.

2) fixed payments, for example, a car loan (that is, a fixed monthly payment during 36, 48 or 60 months. Usually, the guarantee is the object itself, for which payment is made.

3) open debt; It is quite rare; the most typical one is the American Express Green card.

15% — statute of limitations. The earlier the credit history began, the more stable it is.

10% — diversity of the credit “basket” (account diversity): the more different current or repaid loans (car loan, mortgage, credit for household appliances, etc.), the better, this means that a person knows how to manage their finances in different areas.

10% — request new loans (inquiries). Every time a borrower wants to take a loan (even a point card in a supermarket), a request is sent to the credit bureau, where these requests are stored. The fewer requests (especially with refusals), the better.

Car loan

It is better to forget about advertising posters with magic percentages, it’s all a hoax or for those who have already fully paid the cost of several cars. If there is a first installment of 30-50%, then there should be no problems with obtaining a car loan. It is better to refrain from the temptation to buy a car for cash from a dealer or on craigslist and use the services of a bank. Car loans can be paid quickly, and at the same time greatly improve your credit history.

“I ruined my credit history myself, or rather, I started it too late, when, having just arrived in America, I bought a car for cash, I had to take out a loan,” admits Tetyana Banks, customer service manager at Citibank.”

Mortgage

If you already have two years of continuous (and certainly good) credit history, as well as a permanent job, you can think about buying a property. As a rule, when you choose a house or apartment, you can find out if there is a prior approval of the mortgage on your credit score. This can even be done on a real estate website, for example, zillow.com.

Aftermath

In America, a lot of goods and services are purchased on credit. Since credit has become more accessible to the population, banks and financial institutions bear greater risks. Accordingly, a standard credit point system was introduced for this purpose. As described above, it is better not to ask for your credit score too often, this can lower the overall score, as it will indicate that the person needs a new loan, which means he is not in a very good financial situation. Also, the interest rate on a new loan can differ significantly for people with “good” and “bad” credit histories. And the most important thing is to pay everything on time.

As Irina Bogdanova says: “You may not pay the card every month, but you must always pay the minimum payment on time, you may forget to brush your teeth, but never pay, even if you are 12 hours late, you will be immediately punished, you will pay a fine for late fee, the interest on your card will immediately rise, and there will be a dark spot on your credit history.”

recent CNN study, showed that now even insurance companies, landlords and employers pay attention to the credit history. According to statistics, one in four Americans who want to get a job are checked at a credit bureau. Administrative authorities attempted to intervene, recommending first to obtain the consent of the candidate for the processing of his data, however, no one can interfere with the decision of the employer to refuse employment.

Read also on ForumDaily:

How to get the perfect credit rating

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

Council of the day. Three easy ways to improve your credit rating

From the first person. 7 things that annoy me in the US

Mortgages in the US record prices dropped

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