Todd Ossenfort has been chief operating officer for Pioneer Credit Counseling since 1998. He writes our weekly “The Credit Guy” column, answering reader questions about credit counseling and debt issues.
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
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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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 get and keep a great credit score.
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 – 28 percent
- Utilization – 23 percent
- Balances – 9 percent
- Depth of credit – 9 percent
- Recent credit – 30 percent
- Available credit – 1 percent
FICO scores range from 300 – 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!
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