Americans usually buy houses, cars, expensive things on credit. A bank that gives you a loan will first of all take an interest in your credit history. If it is good, then interest on loan repayment will be quite acceptable, if bad, then draconian interest can be expected.
What is it: a bad and good credit history? Why is it needed?
Before you start creating your own credit history in the United States, make sure that you really need it. In general, it is difficult to live without a credit history, but there are special cases where a credit history may not be needed. If you are not going to buy a house or car on credit, use credit cards or work in a financial institution, then you can easily do without a credit history.
With a credit history are not born, it is created, and sometimes during the entire adult life. Now, university students often have to take out a loan for studies, which they begin to pay shortly after completing their studies. So begins the credit history of many. And what about those who do not study or have recently arrived in the country?
The easiest and logical step is to open a credit card. Many shops, banks, hotels and other businesses offer to open their credit card, luring new customers with all sorts of discounts on purchases and services. Everything looks very simple – he answered a couple of questions in the store, received the promised discount, and received a credit card in the mail in an envelope.
In reality, everything is more complicated – new applicants need to have a steady income. If you don’t work, you won’t open your credit card and you’ll have to ask your relatives to add your name to their credit card and their account. You will receive a card with your own name and the beginning of your own credit history.
If you already have a steady income and a credit card, then you can try to buy an expensive thing on credit, for example, a car. As practice shows, credit card holders, even with five years of experience, face difficulties in making a first significant purchase.
Car dealerships (when it comes to buying a car and financing is also provided there) explain that buying a loan is a different type of loan than a credit card and it’s completely unclear whether you will pay the loan on time or just run away with the purchase.
There is a way out of this situation, but the difficulty is that a guarantor is required. A person who would assume your financial obligations in case of anything and who will sign all financial papers with you. Finding such a person is more difficult – there is a risk.
The risk is that you do not pay your installment on time or miss it. This will immediately affect not only your credit history, but also your guarantor’s credit history.
Of course, there are many noble people in our world who are ready to come to your aid, but in order to be a guarantor you also need to have a good credit history. Not all Americans fall into this category.
There is another option in the difficult task of building a credit history. As soon as you have a formal job, you will need a bank account. Set aside a few thousand in a savings account and ask for a loan from the same account: in other words, borrow money from yourself.
The bank does not risk anything, because your money is there, and even then – you won’t start returning money to yourself. Plus, the bank will take a certain amount for the service provided.
Of course, this option is not the most convenient for you – you will have to freeze the money you borrowed from yourself and pay for services, but in this case you will not have to depend on others and spend many years earning a good credit history.
Later, when the auto dealer or the bank where you want to take a mortgage loan, check your credit history and see that you have borrowed money in the bank and regularly and on time paid a monthly amount. This is exactly what they want to see and exactly what you need.