Prince

Would some kind soul explain to me how this American credit system works? I'm from Europe, originally, only been to the States for a little over a year, and not used to, or aware of, how this aspect of 'living' works. See, where I am from, if you don't have unpaid outstanding debt, you pay your bills etc etc, that means your credit standing is perfect. It doesn't get better than that; essentially, it can only go down.

But here in America, it seems that you start with nothing and build it up somehow. I recently applied for a credit card, and got shot down because of "insufficient credit". Since I have done absolutely nothing to ruin my credit, I can only assume that they denied me the credit card because I've never had a credit card here, or a loan, or anything like that. All I have is a checking account with a debit card.

So how does one build a credit history in this country? I don't want to take out a loan just for the sake of building a credit history, but unless I build it up somehow, how will I ever be able to get a mortgage or anything?

It's just really confusing.

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Who is John Galt?

Journeyman

You build credit by getting a loan on something, and paying it off over time, with interest tacked onto those payments. That way, creditors know they can make some money by loaning to you.

You're essentially buying good credit by paying the interest rates. It sucks, but what incentive does anyone have to loan to you if they don't profit?

Unright

Credit is essentially a sort of proof that you will repay and money borrowed with interest on time. Yes, you have to earn a worthy status.

It's easy to earn credit though... Apply to different credit cards (the offers might not be as good) and you should be accepted by 1 or 2 of them. Buy something and pay it off. Make sure your payments are prompt. An easy way to accomplish this is to have at least the minimum payment automatically drafted from your banking account. Your first credit card with no previous credit is usually in the $200-$300 range, so minimum payments of $15 shouldn't be a problem. After a few months you can request a greater credit limit.

Have utilities in your name and pay those on time helps as well.

Prince

How do they keep track of what utilities are in my name? How does my GOOD credit info get updated?

I've tried to get one of each of the major CCs, none would accept...

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Who is John Galt?

maleficent

When you get the utility, you are generally asked for your social security number, that's what your identifier. If you pay late, then The big 3 credit reporting agencies will know about it.

You can check with Equifax, TRW, and the third one which I am drawing a blank on to get your credit report - and check it yearly for any descrepencies as well.

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k1ng

See if your bank has credit cards (NOT the visa check cards). You might have better luck getting one through them, if you've been a good customer.

I got my first card through Capital One. I didn't have much(if any) credit at the time. Also check Providian, as they also seem to be fairly easy to get a card from.

Are you a student? Many credit card companies offer special cards for students.

EDIT: to add to what maleficent said, the three credit agencies are:
1. Experian (Formerly TRW) - (888)-397-3742
2. TransUnion - (800)-916-8800
3. Equifax - (800)-685-1111

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"Delight in excellence is easily confused with snobbery by the ignorant." -Joseph Epstein

ShaniFaye

When I first started trying to build my credit up I ran into the same problems...My first credit card was a gas card (Texaco), then I financed a washing machine and a dryer....that was pretty much all it took to get me in credit card hell lol, 15 years later I have gotten rid of every credit card I had and I owe nothing thru financing save a vehicle...(and a mortgage)

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Destrox

Also keep in mind, when you apply to many credit cards and get denied. Each and everyone you apply to and the status of that is kept on your credit record. So if you have a long history of being denied, banks will pick up on it.

Its essentially best to just use one credit card and keep a PERFECT record with that. Then rely on your other loans, bills, and etc for additional help. (cell phones, utilities, student loans (in my case they hurt me since they are unpaid as a 20,000$+ loan.)

It simply takes time, and if you play your cards right you will have a excellent rating. Hell I am only 21 and have a 752 rating.

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You bore me.... next.

MSD

I hate you now

Start with a gas card, after three months, you'll have enough of a rating that you can go for a low max card, then build up from there. Just don't spend more than you make, and you're fine.

j8ear

At 22 I had racked up around 25k in credit and disappeared for 10 years.

At 32 my credit was in the 500s. No one would extend me credit.

I had approximately 30 tradelines on my credit report, most charged off.

By state law the statute of limitations had expired to sue for collection on these debts, and the FCRA reporting laws stated they were ineligible for publication by Credit Reporting Agencies.

I approached the problem with a two pronged attacked:

1. The creditor and its assignees (i.e. collection agencies). They have federal and state laws they must follow in order to provide and collect debt. They are also limited time wise on how long they can bring a cause of action to recover past due debts. All but two violated the Federal laws, which provides for ~statutory_$1000~ and punitive (only if you can show harm) damages. They were easy to deal with, but it did take a lot of letter writing. Letter writing resulted in them continuing to violate the FCRA, and then I racked up one thousand dollar damage awards one after the other. Upon receipt of your letter, they must notify the CRA that the item is in dispute. They don't...$1000. Simple as that. This is apparently recoverable in Small Claims if the amount is small enough? I don't know, it never came to that point.

2. The credit reporting agencies. They have 30 days to respond to your inquiries. You do not have to provide them JACK, except what info they publish you are disputing. You dispute an item, they are required to have the creditor reporting it verify it. They often do 'automatically' some how. BUT, the CRAs are also required to provide a 'method of procedure' in verifying your dispute. They don't unless you ask for it, and even then they often don't. Shazam...also a FCRA violation with 1.5k in statutory damages recoverable I believe. Getting the money is pain in the ass. I've heard of failures and successes in getting anything.

Mine turned out pretty good. After about two years, 100 certified letters, and alot of patience, I had reestablished credit...to the tune of between 730-760 depending month to month on my balances. Over the course of two years I kept only a secured credit card that had the balance fluctuate all over the place. Up to limit of 3k and down to zero. At the end of two years, someone added me as an authorized user on a CC with a 50k limit, 0 balance and 15 years of perfect payment history. I went from 640ish (removed all negative tradelines except a paid tax lien) upto 750, over night. I was suddenly golden boy with people extending me credit at the rates reserved for those with the best of credit.

BTW. Fair Isaac, the company that compiles that numeric 'FICO' score, directly queries the data in the three major CRAs lists to compute your score. You can't petition them for anything...nor are they very forthcoming on exactly what goes in to creating their 'score.' All you can do is control the data the CRAs publish.

Obviously credit worthiness is computed based on Debt history, Available Credit Limits, Percentage of outstanding credit to that limit, income. Other factors that some believe FICO uses are color, religion, national orgin, zip code, relatives credit histories, state court records (which do show up on Credit reports (tax liens, fines, etc...), driving history, medical records, insurance history. Who knows, alot of conspiracy theories out there.

If you want to learn alot about someone who has struggled with credit for a long time check out:

bayhouse.com

Christine is the moderator's name. She has filed a bunch of suits, settled some, recovered some cash, etc...and has started a different website for just about all her trials and tribulations. Check it out. You'll learn alot about credit, credit reporting, and various companies that can cause you problems.

Capitol One is one of them btw...stay away...~yikes~

Utility companies ONLY report when you are in default. They do not publish positive info.

Prince, you should write what ever CRA was used to determine that your credit was 'insufficient'. The company who denied you credit, is required to notify you why (they do so vaguely) and with what information was used. You are then allowed free of charge to see that information.

If you moved to the US and work and have money coming in to your banking institution, they will be much more receptive to extending you credit based on alternate information, such as your history with them.

Your right btw...you have to build credit in the US.

-bear

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It's alot easier to ask for forgiveness then it is to ask for permission.

Amano

Hmm... does telephone count as "utilities?" i've been getting phone bills through my college (i live in the dorm system, and the school runs their phone bills), but would they report to credit bureaus or is it only the big phone companies that do?

basically i pay my phone bill about once every 6 months (along with a whole bunch of fellow students). the balance just gets tacked onto the next month without any sort of late fees, and they don't shut off your phone for nonpayment or put any holds on regsitration.

have i just screwed myself over in terms of credit

edit: also, how does one go about finding his credit rating? is it just a matter of calling up one of the credit bureaus and asking?

billege

For a report of everything they have on you, including your FICO score, you may try: http://www.equifax.com/

They are one of the 3 big credit reporting agencies. The other two are:
http://www.experian.com/ and http://www.transunion.com/

Any of the three will be happy to charge you for a copy of your information. I tend to like equifax. My wife and I pay them to run our reports twice a year. We get all of our information and our FICO scores. We do this twice a year just to check that what they've got out there is accurate. We also do it to prevent too much damage from identity theft, if it were to occur. Identity theft is when someone uses your information to fradulently use credit. By checking our information we can see all the credit requests made in our name. If we didn't make them, we know somethign is up. Granted, some people check much more often than twice a year, as a lot can happen in six months. Equifax will provide all sorts of credit monitoring services. You can have them email you every time your credit information changes, or a request for a credit check is made on you.

From breif glances at the big 3's websites, it appears that all of them offer very similar services. Just going over to one and reading the free information they provide may help you learn about your credit. They also tend to link to other credit agencies and services out there.

Hope that helps some.

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"My Invisible Friend is better than your Invisible Friend."