Build Credit History in USA from Scratch
Note: the article is not finished. Work in progress.
What's it all about?
Back when I moved to the USA, I know very little about credit history and credit scoring. I couldn't recall the names of the credit bureaus and had no idea what my credit depends on.
I did know, however, that my credit affects my ability to get a great APR on loans and mortgages. And that's pretty much all I knew.
Speaking to other expats, I often find that they, coming to the USA, also have no idea how to build their credit in a proper way and why it's important. I didn't know either, made some mistakes in the very beginning, then started to learn more about the topic and now have a very clear strategy and tactics that would allow me build a very strong credit.
Why Should I Build My Credit History
Whether you want it or not, at some point your credit history will starts being built by itself. But I'd advice to take full control of it, and never get it loose.
Here are some benefits that might come out of having a high credit score:
- You'll be able to get great terms – such as APR (Annual Percentage Rate) – on your auto loan or installment loans.
- You'll be able to get great terms on mortgages. I put it as a separate point here, since even 0.5% in mortgage saves lots, lots of money. Practically, financial institutions would be fighting to get your business.
- You'll be able to get the best credit card deals there are. In this case, it's not just about the APR. If you're financially responsible, you probably won't even care about the APR since you would always PIF (Pay in full). The important benefits of great credits cards are rewards (either cash or airline miles/points) and sign-up bonuses. Essentially, you'll earn money (worth 1% to 10%) whenever you use your credit card.
- The sign-up bonuses mentioned above might actually be huge! One of the best cards, Chase Sapphire Preferred, has a 60,000 points sign-up bonus as soon as you spend $3,000 within first 3 months. And 60,000 points roughly mean a Round-Trip travel to Europe, or a couple of Round-Trip travels within the US.
- You'll never have a problem acquiring a great deal on renting, cable/internet services, etc; minimizing your security deposits all the way down to zero.
- There's more...
So, What Does Credit History Mean?
What's a Credit Score?
Credit Score is a number, calculated by a formula that nobody (except people who invented the formula) knows exactly. But ...
- Banking relationship helps (Chase): 1, 2, 3, 4, 5 - Pre-qual sites (google research before going forward - chase and capital one are good, discover maybe)
- FICO AAoA includes closed accounts for 10 years after their closing date. That means, if you have to close a credit card, close it (as long as you're good with utilization). Keep your cards if you have to have the credit limit for utilization or if you want to keep the relationship with the bank. If there's no yearly fee, don't close it without a significant reason.
Also this http://www.doctorofcredit.com/an-introduction-to-chexsystems-inc/