What to do if you have no credit?

[Caffeine.addict]

A friend of my wife's is in a an unusual situation. She is an immigrant from the former Soviet Union, and she wants to get a credit card so she can build up a credit history. She has a good job that pays her about $60K per year and no debts. She can't seem to find a bank that will issue her a Visa card since she has no real credit. She got a loan to buy a car from her credit union, but they can't issue her a visa card since she doesn't have a credit score.

What should she do?

Does anyone know a bank that will issue her a card?

[Q.E.D.]

Secured cards are a good way to start building credit. Typically, you put down between $200 and $500, and you get issued a card with that amount as the available credit. Over time, as you use the card and make timely payments, they periodically review your account and issue credit line increases. The car loan is also a good way to build credit, as long as she makes timely payments. Unfortunately, there are few good shortcuts to building good credit.

[Stainz]

What about a 'secured' credit card? I know many credit card companies will offer those to people with poor or no credit. For example, Capital One.

The person pays a 'deposit' (say $100) and gets a card with a small limit. If she uses it often and pays it off promptly, they will soon offer to increase the limit with no additional deposit.

There is a monthly fee for the card whether it's used or not (Capital One is $6 I think), and the interest rate is pretty high, but it's a way to start building credit. Once she is able to get another card, or a line of credit or something, she can cancel the secured card.

S.

[Quartz]

Can the US banks not refer to the Russian banks?

[Ol'Gaffer]

Try getting a gas card. They typically have to be paid off every month so you don't have to worry about carrying balances and, from what I understand, their standards are somewhat lower. I got one when I turned 18 and I had no credit (or money actually) to speak of.

[Giles]

It's not an unusual situation. When I migrated from Australia to the US, I had no credit record in the US (though I did have an Australian credit card that worked in the US). The first step that I took on the road to a credit history was to get a credit union account, with a Visa card attached that I could use like a credit card. That starts building up a credit history for you.

[Giles]

Originally Posted by qts

Can the US banks not refer to the Russian banks?

They don't even refer to Australian banks!

[Balthisar]

Try department stores. My very first credit card at age 18 (I don't imagine it could have been 17) was from Hudson's. I still have it, and it still says Hudson's (I imagine if I use it they'll send me a Marshall-Field's card; account's still open).

I think it had a $100 limit, which was a lot of money to me back then. Still a lot of money now, just not for a credit card.

But as was said, it takes time more than anything.

[Giles]

Originally Posted by Balthisar

Try department stores. My very first credit card at age 18 (I don't imagine it could have been 17) was from Hudson's. I still have it, and it still says Hudson's (I imagine if I use it they'll send me a Marshall-Field's card; account's still open).

Back when I had no credit history, I was knocked back for a store credit card. (I only applied because they offered a discount if you got their card). And having had it happen once, I didn't want to try with other stores and have a credit history of several rejections.

I should add that now, having been in the US for over 4 years, I get credit card offers in almost every mail.

[Otto]

Originally Posted by Stainz

There is a monthly fee for the card whether it's used or not (Capital One is $6 I think), and the interest rate is pretty high, but it's a way to start building credit.

Unless things have changed radically since I had a secured Capitol One card there is no monthly fee. There is a yearly fee.

And of course interest is not a consideration if you pay your balance in full each month.

[Hail Ants]

I had no credit about 5 years ago. Not bad credit, just none. I never applied for credit cards because I never wanted one (seemed stupid to take out a 19.9% APR loan to buy, like, a VCR or something!)

But once the internet hit it big a credit card became a necessity for online purchases. So I bit the bullet and got a Providian secured card. $90 fee and $250 security deposit. Used it occasionally, always paid it on time. After a year or so I started getting offers for better cards and slowly replaced the secured, high-interest ones with those.

Now, five years later, I have about 5 unsecured, no annual fee, low interest credit cards (and even an American Express card!) Only bad thing is all the damn offers I get every week for more of them.

[scr4]

Wow, exactly the question I was going to post...

However I checked the web pages of the banks mentioned (Capital One, Providian) and don't see any service or application form labeled as "secured card." But a Google search reveals a lot of sleazy URLs with online applications. Can someone explain why this is, and what the best way is of applying for a secured card?

[tadc]

As stated above, get a secured card and gas/department store card and USE them. The credit score is largely based on time with no late payments, length of time you've held the card, high balance and monthly payment amount. Accounts like checking and cellphones also show up.

[Backwater Under_Duck]

Originally Posted by brujo

She got a loan to buy a car from her credit union, but they can't issue her a visa card since she doesn't have a credit score.

This makes no sense at all. She may not have had a credit score before she got the loan, but she sure as heck has one now. Perhaps the CU just didn't want to give her more credit on top of the car loan at the same time. Either way somebody else will. After all, she's got good credit . If she's paying her car loan on time, that is.

[Balthisar]

Originally Posted by Otto

And of course interest is not a consideration if you pay your balance in full each month.

Maybe for Capitol One, but not necessarily. There are crummy cards that have no grace period, i.e., interest begins accumulating when the charge posts. Make sure you check this out!

[jsmith]

My advice from someone who has been in the same situation is to wait a couple of months. You said she got a car loan so hopefully that means she has a social security number. After making payments for a little while she will get a credit score. Then she can go to her local credit union and get a credit card.

[Cillasi]

Originally Posted by Ol'Gaffer

Try getting a gas card. They typically have to be paid off every month so you don't have to worry about carrying balances and, from what I understand, their standards are somewhat lower. I got one when I turned 18 and I had no credit (or money actually) to speak of.

If you pay your balance off every month, you don't build a credit record. It's a common mistake. You must make payments over time and on time in order to build a credit record.

Next mistake is to apply for credit at too many places at once or in quick succession. That throws a red flag up and you will automatically get turned down. If that happens, wait 3 months and try again.

Your friend is well on the way. The car loan will give her a credit history. After about 6 months, she can probably safely apply for a store credit card at least. Some smaller banks may even approve a master card or visa.

[shimmery]

Originally Posted by Cillasi

If you pay your balance off every month, you don't build a credit record. It's a common mistake. You must make payments over time and on time in order to build a credit record.

Not to hijack the thread, but what exactly do you mean? I actually just got a credit card (American Express Blue for Students) for the specific purpose of building a credit history, but so far I've been paying the balance in full each month. Does this mean that if I want a credit history, I'm obligated to pay interest on my balance every month?

[tadc]

Originally Posted by Cillasi

If you pay your balance off every month, you don't build a credit record. It's a common mistake. You must make payments over time and on time in order to build a credit record.

This is not true. The bank might like you better if you carry a balance, but it's definitely possible to get a credit score in the 700s without carrying a CC balance.

The banks only have what is on your credit report available to them (and what you reported on your application) to determine your score. The only info available for each entry is as follows:

Date Opened:
Type: (Revolving/installment/etc)
Reported Since: (length of time the account has been reported)
Terms: (repayment terms, usually NA for credit cards)
Date of Status: (date of report)
Monthly Payment: (minimum payment)
Last Reported: (date last reported)
Responsibility: (individual or joint)
Credit Limit/Original Amount:
High Balance:
Recent Balance:
Recent Payment:
Balance history: (historical account balance by month)
Frequency and days late (30/60/90) of any late payments.

So, assuming you use the card consistantly and pay the "amount due" every month, the credit report gives no clear indication that you paid the whole amount due, since "recent balance" also includes recent purchases made after the statement closed (and therefore not part of the "amount due").

Simply by opening account you "build a credit record". How "good" that record looks to the credit issuer depends on a complex formula that varies from creditor to creditor. When I applied for my mortgage, the broker pulled my credit report along with 3 different "scores" from different companies. The difference between them spanned more than 100 points. They used the middle one.

[zoltar7]

If you search the boards at creditnet you'll find threads about low-fee secured cards that report to CRAs as unsecured (apparently this is more helpful in credit-building).

I believe one recommended card was from Digital Credit Union--there's some trick where you join a nonprofit that makes you eligible to join the CU.