After living overseas for five years, bringing a dormant U.S. credit file back to life takes a few smart moves combined with a little patience
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Dear Opening Credits,
I have lived overseas for about five years and am now moving back to the U.S. I have had no open credit for those five years and now want to repair and rebuild credit. Will it negatively affect my credit score if I were to get a car loan via a co-signer and a secured credit card all the while renting a new apartment with new utility bills attached? I am married now and want to build credit in order to purchase a home and maybe obtain a school loan to start a new career in dental hygiene a year later. How many credit accounts can I open at once without drastically affecting my credit? I will need to open two to three different credit types: car loan, secured credit card and furniture loan. — Will
You’re a man with a plan! Even better, you appear to have a pretty good idea on how to implement it. To really get it going, here’s what you need to do.
Because your credit requires mending, you might see notations indicating delinquencies, defaults or accounts that went into collections. This kind of information stays on your reports for seven years, so they will be with you for another couple. There is only so much you can do to repair such damage. You can satisfy collection accounts and, if you do, your scores will increase as the overdue debt won’t be factored in anymore. Correct data, however, can’t be removed until the clock runs out, so if you do spot such legitimate dings as late payments, prepare to wait.
On the flip side, any well-handled accounts should have worked in your favor. They are listed on a credit report for 10 years, but can remain indefinitely if they’re still active.
After you understand the past, come to terms with the present: your current credit scores. You can buy your FICO scores from myFICO.com for $20 from each credit bureau (TransUnion, Equifax and Experian). Get all three if you can, as you never know which a future lender will use.
FICO scores range from 300 to 850. Although yours may be low now, that’s OK. You can change them dramatically in as little as a year. Besides repaying bad debts, you can and should begin to add new and better information to the reports, so they can be calculated in your scores quickly.
The secured credit card and co-signed car loan are fantastic ideas. Presuming you have a job and some savings, go for a credit card first. Secured products are ideal for people who’ve stumbled in the past. With just a few hundred down as a deposit, you can charge and rebuild. Spend a small sum regularly, but pay in full.
In about six months, you’ll have increased your credit scores and will be ready to consider car financing. If your scores aren’t high enough to qualify for a low rate on your own, ask a friend who does have good credit to guarantee the loan. Be extremely careful with this option, though, as the account will appear on both your and the co-signer’s credit reports. You don’t want to ruin a relationship with a spotty payment history.
Many landlords check credit reports, so if you’re applying for a rental before having the chance to prove your financial acumen with the credit card and loan, be prepared to offer a hefty security deposit. This way you can appear more reliable. Once you’re in, pay all household bills as per the contract. They typically won’t appear on a credit report unless they’re in bad standing, although more property management companies are reporting rent payments to the credit bureaus. The only way to find out if yours does is to ask.
As for your education, high credit scores aren’t necessary for federal student loans, but are for private loans. Therefore, if you’ll need to borrow directly from a bank (ask the school’s financial aid department), wait until your FICOs are in the great zone — 750 and above — so you don’t overpay in interest.
Once you’ve mastered the single, secured credit card and reduced your car loan debt, apply for an unsecured credit card. Use it the same way as the initial account. When the negative data is purged from your reports, all that will remain will be what you’ve done lately, a perfect pattern of borrowing and repaying. At that point you’ll have what you want — a fresh start in your home country.
See related:9 credit-building tips for U.S. immigrants