New citizen tips for building good creditBy Todd Ossenfort
Dear Credit Guy,
I've
recently become a permanent U.S. resident and now have a Social Security number.
I'm married to a U.S. citizen with an excellent credit score. Since I cannot
apply for a credit card myself, and I am not working yet, I've been told by my
bank that I can get a "joint account" with my wife to get a credit
card to start building credit history. Is this statement correct? Would you be
able to steer us in the right direction and point out some credit cards that
would do that for us? My main concern is starting to build credit history!
Thanks for your help!
-- GC
Dear GC,
Welcome
to the United States. You have zeroed in on a very important part of our
culture -- a good credit history. Not only does a good credit history help you
qualify for the best rates for borrowing money, but your credit history is
viewed by potential employers, landlords, and even to establish insurance
rates. Establishing and maintaining a good credit history is a great goal for
new citizens as well as young adults.
Opening
a joint credit card account with your spouse is one way to begin to establish
credit in your own name. With a joint account, you will be equally responsible
for the payment of the account along with your wife. The account will be
reported on each of your credit reports, and as long as the account is paid on
time and as agreed, you will begin to build a positive credit history.
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Your keys to getting into the 700-plus credit score club
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Having a solid credit history with a credit score over 700 will open doors to money-saving opportunities -- from low-interest mortgages and loans to lower APR credit cards, better insurance rates and even jobs. Here are a slew of tips that can help get you and keep you in the 700-plus credit score club.
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Another
alternative to a joint account is for your spouse to add you as an authorized user to any existing credit card accounts she or he already has established. As
an authorized user, the account and its history will be reported on your credit
report under your name. This may be a bit quicker in establishing your credit
history if the account has been established for many years. The reason being,
the account will appear on your credit report with the same number of years of
history even though you have not been on the account the entire time.
To
give you and any readers who are new to establishing credit, let's go back one
step and review what is included in your credit report and how the information
in your credit report is calculated to formulate your credit score. Creditors
report information to the three major credit reporting bureaus, Equifax,
Experian and TransUnion. Information included in your credit report is your
name, address, Social Security number, account information for car loans, home
loans, credit cards and any other credit accounts. Items that are not included
in your credit report include your gender, race or ethnicity, national origin,
religious preference, political affiliation, checking or savings account
information, medical history or details about your personal lifestyle or
friends.
Also
included on your credit report are any negative items such as late payments
(30, 60, 90 or 120 days late on payment), collection activity (when you have
not paid as agreed and the account is turned over to a collection agency) and
any public record information such as tax liens, judgments, bankruptcies, etc.
You
will want to steer clear of any of the items included in the paragraph above.
The items included in your credit report, both the positive and the negative,
are used to calculate your credit score. A commonly used credit score is the
FICO score by Fair Isaac. A newer credit score called VantageScore was
established in 2006. The components of the FICO score are:
- Payment
history - 35 percent
- Amounts
owed - 30 percent
- Length
of credit history - 15 percent
- New
credit - 10 percent
- Types
of credit used - 10 percent
The
components of the Vantage Score are:
- Payment
history - 32 percent
- Utilization
- 23 percent
- Balances
- 15 percent
- Depth
of credit - 13 percent
- Recent
credit - 10 percent
- Available
credit - 7 percent
FICO
scores range from 350 - 850 and Vantage Scores range from 501 - 990, with the
higher the score the better for both.
One
other item to consider when building your credit is some type of installment
loan in your name. The simplest and easiest to obtain is a passbook savings
loan. Essentially you borrow money secured by a deposit in your savings account
and pay the loan back in monthly installments. To answer your question
regarding the best credit card account for you and your spouse, you are in a
great place to begin your search. Determine what needs and wants you have for a
card and begin shopping.
Take
care of your credit!
See related: What VantageScores are, how they work, Tips for immigrants building a U.S. credit history, Authorized user or joint account holder
Todd Ossenfort is the chief operating officer for Pioneer Credit Counseling in Rapid City, S.D. Pioneer Credit Counseling has been a member of the Association of Independent Consumer Credit Counseling Agencies since 1997.
The Credit Guy answers a question about a debt or credit issue from a CreditCards.com reader each week.
Send your question to The Credit Guy.
Published: March 16, 2009
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