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Why we can compare “Credit” in the US with the chicken and the egg problem
- January 21st 2020, 11am
- by Sarah Sheridan
One of life’s greatest mysteries is what came first: the chicken or the egg? Unfortunately, this same problem can be applied to credit in the US because if you don’t have a credit history, it’s tough to be given a line of credit. But how can you get credit history if you haven’t had any experience using credit before? Read on to find out how to navigate the complicated world of getting credit in the US without having credit in the US.
The main issue people run into when applying for credit in the United States is that banks require data on everyone’s financial history before approving them for a line of credit. This can be for a credit card, a car loan, or even an apartment rental! Financial institutions will look at someone’s credit report to determine if they are high risk for defaulting on their payments and use that information to set credit limits and interest rates. Most credit card companies will deny someone if they have no credit history at all in the US, even if they were financially responsible in their home country.
There are a couple ways to navigate this “which came first?” conundrum, and you’re particularly in luck if you are relocating to the US with your job. There is a Mastercard credit card available to global professionals who require high spending limits and the traditional freedoms of a US credit card, even before they have a social security number. CreditStacks is a new company that uses a behavioral risk profiling system to identify low-risk consumers who need higher credit limits to be able to settle in the US comfortably. We like this option the most because CreditStacks takes into account the actions that can help build your credit quickly, like having an auto-pay option on their app. You can also set that your balance will always be paid off at 30% of your limit, so you never have to worry about late payments, going over your limit, or additional interest.
The more traditional option for starting your credit in the US are through secured credit cards. These have been the go-to in the past for everyone; first because it was the only option, and second because it’s low upfront cost makes it more attainable for anyone wanting to build their credit history. A number of major credit card companies, like Discover and Capital One, allow people with no credit to put down a deposit on a secured credit card and start with a low limit. If you pay off your card on time every month and follow the other rules of maintaining good credit, you’ll be able to raise your monthly spending limit and eventually acquire a no-deposit credit card.
Start with either of these smart options, and you’ll be on your way to a good credit history in no time!