Immigrants reveal shock, confusion at US credit system
Those new to the US say road to good credit a challenging journey
Consumer finance expert, author and “Opening Credits” columnist.
Obtaining a credit card and effectively managing your credit can be a formidable task even for people raised in the United States. There’s a lot to learn along the way, and mistakes are expected. For immigrants, however, the process can be mystifying. The way credit cards are offered and granted in the U.S., as opposed to what it’s like in their country of origin, is usually very different.
However, borrowing from a financial institution is a necessary step toward achieving the American dream of success and prosperity. According to the 2016 Kauffman Index Startup Activity report, for example, immigrant entrepreneurs account for 27.5 percent of new business owners in the U.S. Creating a consumer credit report with well-managed accounts translates into high credit scores, which can increase financing opportunities to grow that business.
Winnie Sun, of Taiwanese descent, is a founder the Irvine, California-based Sun Group Wealth Partners, and host of the Renegade Money Show podcast. She works with immigrants hailing from virtually every country, noting their goals tend to be universal. “They want to assimilate and be mindful with money and get credit, but they’re overwhelmed,” says Sun. “Most know nothing about it when they get here, so you can imagine how confusing it all is!”
Here six immigrants from around the globe share their impressions about the U.S. plastic culture, and how they navigated the road to good credit:
Christopher Daish, Australia
New York resident Christopher Daish, an executive at real estate company TripleMint, grew up in Australia. His introduction to U.S. credit cards occurred during college.
“I did my undergrad at Cal [University of California, Berkeley],” says Daish. “Once I got to America, I was blown away by the credit card companies. If you get one, you get three more offers! I was amazed at how easily they were handed out. You paid it off and the limit increased! There’s much more red tape in Australia.”
The age and attitude of users also was shocking. “In America, people get offers for credit when they’re young and not fiscally mature,” says Daish. “We don’t do it at an early age in Australia. People seem to live beyond their means here. It’s a credit-infused nation.”
It took Daish years before he absorbed how crucial building a credit history is. “A lot is riding on credit scores,” he says. “In the last three to four years, I really understood the importance of building credit because I work with people who want a home here. I’m in real estate, and the first thing we do is run a credit report. With rentals, it’s very important because the landlord wants to see it and, of course, so do lenders for mortgages. People who come here to live need to know this!”
When Alexandr Gerard, who was in the banking and finance field, first arrived in Washington, D.C., from Russia, he heard he had to work on his credit rating as soon as possible.
“It seemed weird to me at first, because I didn’t really understand the importance of credit history,” says Gerard. “In my country, I knew that if you have a decent income and some savings, you will never have any problems with getting a credit card, if needed. In fact, people with good income try not to get into any debt in Russia, so staying away from credit is the most socially acceptable behavior. It’s still a debit card culture. People don’t trust banks and for good reason.”
Gerard wanted to start out in the U.S. right, but he says that resources he found online were heavily biased. “They tried to push me into the prepaid and secured cards direction, making the impression that with no credit I only can start with something costly and grow my credit extremely slow,” says Gerard. “I skipped the secured card stage and went for a general purpose unsecured credit card, but the limit was a joke in comparison to my income and monthly spend. So, my first credit card has been a very inconvenient training tool just to get ahold on my credit.”
Still, his irritation eventually turned to admiration. “Later in life, I went through starting businesses, renting offices and places to live, and at every step, I did admire how important credit history is in the U.S. for both a person and a business,” says Gerard. “With a current degree of automation and standardization, it was clear to me that often people will not even consider talking to you if your credit is limited or far from excellent. I got an excellent credit score quickly, and the journey was very interesting. It looks more difficult than it is.”
Due to geographic proximity, a Canadian citizen might assume that the U.S. credit system is pretty much the same as it is up north. At least, that is what Susan Oh, originally from Vancouver and now a New York City journalist, believed. After all, TransUnion and Equifax compile credit reports in Canada as they do in the U.S., and credit scores are also used by that country’s lenders.
Yet credit history and ratings aren’t automatically transferable. “It’s completely separate from Canada,” says Oh. “I thought they were so similar, but there may as well be a body of water between us. My Canadian FICO score didn’t matter here, so I had to start out with a prepaid card. I got my boyfriend to sign for a real credit card with me and started with $500.” With it, Oh rebuilt her credit reputation in four years.
Oh was initially shocked by the amount of credit cards that are available in the U.S. “We don’t have as many in Canada, and here it’s huge! It runs the full gamut, so many different kinds, and it’s a dizzying amount of choice! I needed a spreadsheet to stay organized.”
“I feel like the U.S. gives out cards too freely. The wide variance of APRs is comical. It’s like racketeering. A lot of promotional offers are really great if you have the resources, but the promotional periods seem like they want to hook people in. I find it irresponsible. It shouldn’t be so easy to get a credit card. Canada has more regulations to protect consumers.”
Five years ago, Ben Guez left France to start his entrepreneur journey, eventually founding Laxir, a digital marketing agency in Los Angeles. And though he wanted a credit card for business, getting it wasn’t easy, nor was he prepared for the scoring expectations.
“In France, it’s not the same,” says Guez. “We don’t have such a thing as a credit score. What was this thing? We only have debit cards that you can use and even overspend on, but there is no credit score.”
At first, Guez didn’t know where to start. “The first few times I applied for a credit card I got denied as I didn't have any history.”
Like many immigrants, success came in the form of a secured card. “I had to change banks and strangely the new bank accepted me really fast on a secured credit card when the first did not offer this option. I went to Wells Fargo for my business and I put $500 out of my own pocket and I said ‘let’s try this’ and it worked. Then when I built my credit they increased my limit, refunded me the money and I opened a new line.”
Guez recommends that other immigrants start creating their credit history as soon as possible with secured accounts. “I just applied to Chase and got approved on the spot,” he says. “It was a funny experience to get denied and denied and now the opposite.”
Guez holds no grudges about the rough beginning. He’s amused. “I don't mind playing the game. It's pretty fun to try to ride your credit. It's more entertaining than anything else for me.”
Emily Yeap, Malaysia
Malaysian-born Emily Yeap is a public relations specialist at Missouri State University, and says that the lack of rules in the U.S. startled her. “It’s a lot harder to get a credit card in Malaysia and much more expensive,” says Yeap.
According to Yeap, young Malaysians had been getting into consumer debt so the government tried to curb the number of cards people applied for by imposing extra fees. “If I had one credit card, I had to pay $50 a year, but multiple cards were the same amount for each card. You paid it to the company. The government made this law because younger people were getting into trouble.”
Yeap found it much simpler to get a credit card in the U.S. “In Malaysia, we don’t get offers in the mail. In shopping malls here, they catch you as you’re walking by! It’s crazy. I didn’t have a credit history, but I got offers anyway. I could apply online and get the results right away. In Malaysia, it’s old-fashioned. You have to sit with a bank manager. Sometimes they’ll ask for an employment letter. There’s no credit report, so it’s solely based on how much you earn. Online, here it’s so easy! You just write down what you earn. It’s so strange!”
Mahar Gheith, Jordan
Although Mahar Gheith is an Uber driver in Vallejo, California, he’s originally from Jordan, where he was a sales and finance professional.
“We don’t have credit scoring, no credit profile in Jordan.” says Gheith. “Credit cards have to be secured with a co-signer who guarantees the line. What kind of job you have determines eligibility, too. So credit cards are not popular. We only have a couple. Most of the people who have them, they’re very wealthy or financially strong. The rest don’t have them.”
The repercussions for not paying a credit card bill are more severe in Jordan, says Gheith. “Most of the time your job or income is at risk. The bank can levy, no problem. That makes credit cards not attractive. People tend to borrow from other people instead. They will turn to family members most of the time.”
Gheith’s review of the American way of handling credit is mixed. “I think sometimes it’s too easy to get a credit card, but the good banks and credit cards are very hard for the average person to get. It’s ugly to worry about the high interest rates and annual fees. For example, in the U.S. it is hard for fresh people to get a decent rate.”
New credit users beware, though. “You have to know what you’re doing.” says Gheith.” I didn’t have the right advice about credit when I came here. I didn’t know how to use it, where to use it. A lot of people think ‘if I have $1,000 credit line, let me use the hell out of it!’ then just pay the minimum. I did that when I first came here because I thought it was what I was supposed to do.”
That was 11 years ago, and Gheith has since learned how to handle credit cards to his advantage: “My scores are very good. I’m on the rise.”
“Immigrants bring money, experience, business and investments here,” says Sun. We’re the benefactors, so as a country, we should do more to make sure they have the correct information. At the very least, she wishes all newcomers would understand how crucial a positive credit rating is. “I tell them that in the U.S. your FICO score is as important as your passport,” says Sun. “Treat it with that much respect. That gets their attention.”
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