Establishing Credit


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Immigrants Build Credit Histories from Scratch

Building a credit history

“The best way to build credit is to start small and work toward a larger goal, says Bruce McClary, vice president of the National Foundation for Credit Counseling, a nonprofit organization. First, consider applying for a secured credit card from a reputable financial institution. Unlike ordinary credit cards, these require a deposit as collateral. Your payments are reported to the credit bureaus, and with a solid repayment history, generally after a year or two, you can graduate to unsecured credit cards, which can offer lower interest rates.

You may also want to open one or two credit cards available from department stores or gasoline stations. These often have higher interest rates but may not require a credit history, and steady repayment can help you establish a good credit record. But be selective. “Applying for a dozen credit cards at the same time will have a negative impact on your credit score, says McClary.

Opening a savings and/or checking account at an established bank can be another plus, says Palmer. Although activity on these accounts usually wont be reported to the three major credit bureaus that calculate your credit score, youll be establishing a long-term relationship with the bank that may be valuable if you apply for a loan or credit card in the future.

Payment strategies

With a new credit card, McClary says, using it is the key to building up your credit. “Youll want to show consecutive payment activity for a few billing cycles, which will get your score off to a stronger start. When you can, pay off the balance each month to avoid paying interest charges. Most importantly, dont miss any payments, because doing that could drop your credit score by 100 points or more. Pay other bills on time as well.

There are no shortcuts to establishing credit, so beware of any companies that offer to raise your score instantly, McClary advises. But if you spend responsibly and pay back promptly, you should soon find yourself with a credit score enabling you to pursue your financial goals. Once youve got the score you need, stay aware of it on an ongoing basis, Egg-Krings suggests. “Checking your score and working to build and maintain healthy credit can help you build assets and increase your personal worth, putting those dreams and goals closer within reach.

(Visit Chase Slate to better understand your credit health.)

After two years in the United States, Vishnu Bethalem had built a solid credit score, which allowed him to lower the interest rate on his car loan and obtain a mortgage with favorable terms. Says Bethalem, “In the United States, you need a credit history to be able to live the life you want.

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