Banking question: Credit Scoring

[Marco-Polo]

I'm in an odd position for a 30-odd year old right now.

I've been living in the US for just over 2 years, mostly as a student in scenic South Bend, and now in Philly as a happily married man and productive member of society.

The hitch came when I applied for overdraft coverage on a new checking account. No dice. For someone who has about $50k in unused lines of credit in Canada, that's a very new experience.

Now, I've had bank accounts open since I got here. Unfortunately, it seems that the US credit reporting system doesn't take bank accounts and their tenure into account; the Canadian one, which I'm used to, does. It also includes utilities, other forms of credit-based contracts like cell phones, etc etc - from looking at the credit reporting agencies' sites it appears that the US system is confined to loans and loans alone.

So the diligent habits I've cultivated to "build" a credit score, keeping a larger balance than usual in my checking and savings, never dipping below a minimum level, are pretty much useless. My good credit elsewhere - also useless, since scores don't cross national borders.

Anyhow, my request for advice is as follows - how do you build a credit score when starting from square one? Whom should I speak to, and what traps should I avoid?

 

[stepthirteen]

I'm in an odd position for a 30-odd year old right now.

I've been living in the US for just over 2 years, mostly as a student in scenic South Bend, and now in Philly as a happily married man and productive member of society.

The hitch came when I applied for overdraft coverage on a new checking account. No dice. For someone who has about $50k in unused lines of credit in Canada, that's a very new experience.

Now, I've had bank accounts open since I got here. Unfortunately, it seems that the US credit reporting system doesn't take bank accounts and their tenure into account; the Canadian one, which I'm used to, does. It also includes utilities, other forms of credit-based contracts like cell phones, etc etc - from looking at the credit reporting agencies' sites it appears that the US system is confined to loans and loans alone.

So the diligent habits I've cultivated to "build" a credit score, keeping a larger balance than usual in my checking and savings, never dipping below a minimum level, are pretty much useless. My good credit elsewhere - also useless, since scores don't cross national borders.

Anyhow, my request for advice is as follows - how do you build a credit score when starting from square one? Whom should I speak to, and what traps should I avoid?

Credit is a balancing act, many many factors involved. I could answer all these for you, but I am going to direct you too a site that will be a huge asset to you -

Credit Info Forum

This site is a huge wealth of info and the people there will help you alot.

Jim

 

[jayro75]

I'm in an odd position for a 30-odd year old right now.

I've been living in the US for just over 2 years, mostly as a student in scenic South Bend, and now in Philly as a happily married man and productive member of society.

The hitch came when I applied for overdraft coverage on a new checking account. No dice. For someone who has about $50k in unused lines of credit in Canada, that's a very new experience.

Now, I've had bank accounts open since I got here. Unfortunately, it seems that the US credit reporting system doesn't take bank accounts and their tenure into account; the Canadian one, which I'm used to, does. It also includes utilities, other forms of credit-based contracts like cell phones, etc etc - from looking at the credit reporting agencies' sites it appears that the US system is confined to loans and loans alone.

So the diligent habits I've cultivated to "build" a credit score, keeping a larger balance than usual in my checking and savings, never dipping below a minimum level, are pretty much useless. My good credit elsewhere - also useless, since scores don't cross national borders.

Anyhow, my request for advice is as follows - how do you build a credit score when starting from square one? Whom should I speak to, and what traps should I avoid?

Best way is to spend money on credit cards, take out loans etc.. and pay them off immediately. In this country your ability and the amount of time it takes to pay back "borrowed" money is what they look at. Oh yeah the best one is to take out a mortgage, after you make your first payment your score shoots up through the roof. I was shocked when I applied for a car lease a few months ago and the car salesman told me my credit score.

I only say this as someone who is able to pay off the debts he incurs. I'm not advocating anyone spending money or going into debt they can't pay off.

 

[Marco-Polo]

Brilliant, thank you.

As for buying a house, car etc. We live in a college-owned house (wife is a professor, and it's a nice perk), and own our car outright (and paid cash). I can't think of the next time that we'll need a significant amount of credit, but the time to start building a credit history is now, when we have no major expenses or commitments, rather than in the future, when we have kids, obligations, etc.

 

[flamchop]

A simple way to start in your position could be to start using a credit card for normal expenses and keep paying it off each month. Like groceries... gas... etc. Then just pay it off monthly. As long as you show that you're able to regularly create debt and pay it off on time that should help at least a little.

 

[Dave]

Ask your bank if they offer a secured line of credit for your checking account. It might be worded differently but the product is just a line of credit backed by your savings account, and they freeze a portion of the funds as collateral.


You can also try to get a personal savings loan (again, a loan backed by your savings account) and pay it back regularly to help build up your credit score.

 

[Mr Peat]

You can say start off with like a Sears Credit card. One of those types of card. You can use it to purpose blue jeans for example. Absolutely do not pay the balance off immediately. Lets say CC company A gives you a $500 balance. You can say charge $100 but never charge more than you can pay off in one bill without hurting your finances.

Take 4 months to pay it off. Rinse and repeat this and slowly you will build credit. Another way is to get a loan at your bank and again, do not borrow more than you can pay off. Eventually this will produce results. Also keeping the same job will help you with all this in getting loans and or credit cards.

Its a real pain in the ass. Its like trying to get a job, yet no one wants to give you a shot as you have no experience in that field. Its the same with credit. No one really wants to give you credit. Also...do not apply for to many credit cards or bank loans if denied. As this will hit what little credit you have and lower it.

You could say try for a Capital One Credit Card and use it for cigar purchases. Always keep on it and never over extend your limit since this is what hurts a lot of people. They get way over their head and fumble. Thus, their credit score falls like a $2 hooker at a football convention. This has been my experience in building my credit as I get my Disability from the VA aka Federal Government, I do not have an income and its a real pain to even get any credit at all.

Just remember...be responsible and do not get in over your head trying to get credit. I do not recommend getting a Credit card or loans either as advising someone on getting credit is something you should take very serious if you decide to pursue getting one. Just be careful is all I am saying.

 

[masterp0606]

Another thing is when you get a credit card do not go over 30% of the max so if you have a 1000 dollar credit limit don't let it exceed 300 or so. And if you have trouble getting a credit card you can get a secure card where you give them money and however much money you give them is your limit. Basically you are using your own money but it will start your credit.

 

[Eryxis]

Go to the credit board it's like a cigar pass for credit info. I do recommend 1 credit card though because it's exceptional. The American Express Blue CASH!!! must be cash. It has unlimited cash back and if you spend a decent amount of money you get 5% rebates in many categories... gas/grocery/drugstore. Also it's ridiculously easy to get a massive credit line on it which in turn helps your scores. Don't listen to anybody who says not to pay your revolving balances off monthly it makes no difference, you just lose money

Ery

 

[stepthirteen]

I highly suggest you look at the board I offered you a link to. It is full of members who are very savy in the credit world. There are several members there who are actual underwritrers and know all of the secret info you desire. If you must know something profound, know this, your best bet is to develop a relationship with a credit union. They are not bound by many of the banking industry rules and tend to be willing to let someone with zero credit have some credit.

Many of the suggestions offered are great, but if you have zero credit do not apply for the AMEX Blue Cash. Get in the door with AMEX by applying for their Gold Delta Skymiles. Also, I would not encourage an application for a Sears card because they are a bit tough right now to acquire. I would try for a Target card because their FICO cutoff is a bit lower.

Again I encourage you to read the info at the credit board forum. I learned a bunch there.

Jim

 

[Mr Peat]

Don't listen to anybody who says not to pay your revolving balances off monthly it makes no difference, you just lose money

Ery

This isn't true. If you pay it off the same month so you an avoid the Interest rate, it actually does hurt you in building credit. Even the credit bureaus tell you to not pay it all off at once. I used to pay my Capital One Card off every month. I never saw a raise in my limit for over 1 1/2 years. Once I started keeping the balance, they worked with me even more. I just got a $300 credit raise which is impressive considering my limit was $300. But since my Disability isn't income nor can any Agency take it from me, its hard to even get a raise in limit. Only one place can take money from me and its the VA itself.

The whole point of a credit card is to show you are trust worthy. If you pay it off the balance completely every month, all you show is that you just charge and pay it off. It doesn't establish that you can handle the credit. The point of the Credit card is to allow a trust worthy person to charge when they don't have the cash flow to pay it all off in one purchase. Like going to buy gas. Sure you may have the $50 cash to pay for it or you could charge it and pay $25 each month. Granted it costs a little more but the CC places are in business to make money.

When you are talking about a credit card limit that is in the $1k+ range, then you really start to feel the interest rate. I would agree paying that off as fast as possible. But it will still hurt you if you constantly pay it off every month. Its plan and simple. If you take the time to read your credit report...you will see the revolving credit card or cards on it and shows you are in good faith. :thumbs:

 

[Eryxis]

The whole point of a credit card is to show you are trust worthy. If you pay it off the balance completely every month, all you show is that you just charge and pay it off. It doesn't establish that you can handle the credit. The point of the Credit card is to allow a trust worthy person to charge when they don't have the cash flow to pay it all off in one purchase. Like going to buy gas. Sure you may have the $50 cash to pay for it or you could charge it and pay $25 each month. Granted it costs a little more but the CC places are in business to make money.

When you are talking about a credit card limit that is in the $1k+ range, then you really start to feel the interest rate. I would agree paying that off as fast as possible. But it will still hurt you if you constantly pay it off every month. Its plan and simple. If you take the time to read your credit report...you will see the revolving credit card or cards on it and shows you are in good faith. :thumbs:

That doesn't make a whole lot of sense. What better way to show you can handle the amount they loan you RESPONSIBLY than by paying it off every month. The CC companies make boatloads off the transaction fees your interest is just icing on the cake. I read my credit report yearly, and it is only concerned with have I paid my bills on TIME. I'm going to agree with stepthirteen though I started out on that board when I was in college and I've got around 40k in CC lines now. I had 30k in Credit when I was in school making 12k a year. All from paying in full every month. Go to that board with any problems and they will fix them for you with minimal effort on your part. I have a Target card and I hate it. They may be good to get in the door with, but they will not raise your credit limit for the world. As mentioned above I have some cards with pretty big lines, but my Target card has never gone over 2k.

Ery

 

[Mr Peat]

I guess nearly 2 decades of dealing with credit cards I've had over the years means squat. We will agree to disagree.

 

[Eryxis]

ok...

 

[StatHaldol]

I'm sure things have changed since I was in your situation (back in the stone age). However; I built up good credit, quickly, by taking out 90 day notes and paying them off in a timely fashion.

I then got a couple of credit cards (I hate them) and made purchases and paid them off in full each month.

It worked for me back in the 70's; I'm not sure about now...

Good luck!

 

[JetDr]

Ask your bank if you can use E-Gold. :whistling:

And I'm sure an excellent trader rating is a help.

 

[moki]

The whole point of a credit card is to show you are trust worthy.

Actually, the whole point of credit cards is to make the credit card companies money. They make money when you carry a balance, and pay ridiculous interest rates on the balance.

I have a fantastic FICO score; I do not have a credit card other than my bank debit card, and my American Express card, which I have to pay off every month.

In terms of your FICO score, it is really is establishing a pattern of living up to your obligations, whether they be paying credit card payments on time (whether in full or not every month), paying your loan payments on time, etc, etc.

Further reading:

http://en.wikipedia.org/wiki/Credit_score_...he_credit_score

http://credit.about.com/od/creditreportsco...score-hurts.htm

Paying off your credit card balance completely each month does not hurt your credit rating.

 

[tone-ny]

I would check to see if your Canadian Bank has a US affiliate and work your credit issues through them. You would be surprised how easy it would then become for you. Another way around this is to have a savings account linked to your checking acting as overdraft protection. Most banks have very steep fees associated with overdraft protection. My bank has sent me a brochure telling me how expensive it will be to use this service. It's there but seldom if ever used.

I'm in the same boat as Andrew, I pay it off and don't worry about it. Debit card is the best, the only time I use Amex is for car rentals and some personal travel expenses otherwise cash is king.

 

[FunkyCold5]

Overdraft protection isn't really necessary if you keep your finances in order.

BUT, if you do want that protection, banks offer Overdraft protection for free, depending on what account you open.

For example, Elite Gold, AddVantage checking, etc, are some of the "special" names banks use on their different checking accounts to offer most of their products for free. You just have to keep a minimum balance.

Like for my bank, min. is like $10k in savings, OR no minimum if you have a mortgage or a car loan, or a combined savings, checking, CDs, etc at $10k, you can get it for free as well.

Just like anything else, shop around.

I have to agree with everyone here. Best way to build up your credit is to get a credit card and use it to buy everything instead of cash, JUST AS LONG AS you pay it off each month. NO balance rolling over to the next month.

Get a card that gives you the most points back. I have two cards, AMEX Blue Cash which provides 5% cash back from Groceries, Gas and Pharmacy. I have a MasterCard, which I've had since college, but I only keep it because of the lenght of time I've had the card and some places don't accept AMEX.

Good luck.

Andrew

 

[stepthirteen]

The whole point of a credit card is to show you are trust worthy. If you pay it off the balance completely every month, all you show is that you just charge and pay it off. It doesn't establish that you can handle the credit. The point of the Credit card is to allow a trust worthy person to charge when they don't have the cash flow to pay it all off in one purchase. Like going to buy gas. Sure you may have the $50 cash to pay for it or you could charge it and pay $25 each month. Granted it costs a little more but the CC places are in business to make money.

When you are talking about a credit card limit that is in the $1k+ range, then you really start to feel the interest rate. I would agree paying that off as fast as possible. But it will still hurt you if you constantly pay it off every month. Its plan and simple. If you take the time to read your credit report...you will see the revolving credit card or cards on it and shows you are in good faith. :thumbs:

That doesn't make a whole lot of sense. What better way to show you can handle the amount they loan you RESPONSIBLY than by paying it off every month. The CC companies make boatloads off the transaction fees your interest is just icing on the cake. I read my credit report yearly, and it is only concerned with have I paid my bills on TIME. I'm going to agree with stepthirteen though I started out on that board when I was in college and I've got around 40k in CC lines now. I had 30k in Credit when I was in school making 12k a year. All from paying in full every month. Go to that board with any problems and they will fix them for you with minimal effort on your part. I have a Target card and I hate it. They may be good to get in the door with, but they will not raise your credit limit for the world. As mentioned above I have some cards with pretty big lines, but my Target card has never gone over 2k.

Ery

He asked how to build credit not how to get 50k lines today. If you want to build credit you have to start somewhere and Target is a great starter card. Oh by the way I have 10k limit on my Target card. Second I was very active on those boards and still post as time allows, so you are correct that board is phenominal.

Jim