We recently went to the bank to enquire about acquiring a credit card. However, to get a credit card, one must have a good “credit score”. This is not the first time we have encountered the need for a credit score – previously we have worked around it.
Now having a credit score (well, a GOOD credit score) is particularly important here in the US – there are even ads on TV advocating it. A credit score is needed to obtain any sort of loan (car or mortgage), or to sign any sort of lease or contract (mobile phone carrier, utility provider or to rent property).
A credit score is a numerical value between 1 & 999 and is calculated according to several factors, but is largely based on your debt history, how much debt you have, the type of debt you have, the length of time you have been in debt (the longer the better, by the way) and your payment history (i.e. paying on time, etc.). A good credit score is generally regarded as being above 720. A low credit score means you pay higher rates for insurance, mortgage, loans and even credit card interest rates!
So, as new residents to the USA, we have no credit history here. Even though we have a home loan, credit cards, a decent income and assets in Australia, this is not taken into consideration and hence, not good enough. When you move to America, “You start from scratch in building a credit history.” Click for more information.
So, one tip to build your credit score is to get a credit card – a vicious circle! For us, that would mean we would have to apply for a secured credit card, whereby we put our own money up as collateral; so even though you obviously have the money, you still need to use the credit card and pay off the balance to build your credit score. It’s all very frustrating to us.
Americans are actually encouraged to have multiple credit cards (to help improve their scores – as long as they pay the balances on time), whereas in Australia we are being encouraged to decrease the number of credit cards we have. Multiple credit cards actually goes against us in Australia in securing a loan, etc. as it increases our potential level of debt. To us Australians (I am sure most would agree), a credit score is a foreign concept – as long as you can prove you can make the payments (i.e. prove your income level, list your assets as well as your debt levels, etc.), then getting loans, credit and signing contracts with utility providers, mobile phone companies and renting is relatively easy.
All in all, I am sure the system works for those who are born and grow up in the USA (there are plenty of people who will default on loans and this is the system that was introduced (~1989) to help prevent that), but for those who are new to this country, it’s difficult and frustrating! More information for those interested can be found at Immihelp.