topic Re: Limited Credit History, How to Get Started in Credit Cards

Limited Credit History, How to Get Started

Anonymous — Tue, 07 Dec 2010 04:59:06 GMT

I am actually seeking on behalf of my wife. She is an Austrian citizen and recently started her path towards US citizenship when we got married this past June. Unfortunately, despite going to University here in the US, and owning a car, she has zero credit history.

A few months ago I added her to my two credit cards as a Shared User (or whatever the term is), but her credit report still says that her file is too "thin" to report a score. My guess is that we are going to have to get her started on a secured card to start building her credit, but I have a few questions / concerns about that.

We're not really worried about the longevity of any card she gets in the beginning because we can always find a better rewards card later (and I'm just not learning that we're supposed to have 4 each, so I'm sure we'll be adding more on soon). What concerns me is that every single one of the secured cards recommended on this site either monthly or annual fees. Some give you the first year for free, but eventually you have to pay to keep the card active. This means that we will eventually be canceling the card, and so it will do nothing to help establish her credit history and boost her average age of accounts.

Is there any other way to get her started on a credit path that doesn't require starting out with cards that will do nothing for her score in the long run? Is it possible for her to get a "real" credit card with only her history from being listed on my credit cards? Is there anything else that we should be looking at?

Also, I assume that we will need to work fairly aggressively to get her credit accounts established as soon as possible so that we have time to let her accounts age before we start inevitably house hunting. It sounds like the minimum time period we are looking at is 6-7 years to get all the accounts set up and age them to the recommended 6 years. Is that right?

Thanks in advance for any advice!

Re: Limited Credit History, How to Get Started

Anonymous — Tue, 07 Dec 2010 07:06:25 GMT

@Anonymous wrote:
I am actually seeking on behalf of my wife. She is an Austrian citizen and recently started her path towards US citizenship when we got married this past June. Unfortunately, despite going to University here in the US, and owning a car, she has zero credit history.

A few months ago I added her to my two credit cards as a Shared User (or whatever the term is) (AU), but her credit report still says that her file is too "thin" to report a score (Accounts must be active 6 months for score reporting I believe). My guess is that we are going to have to get her started on a secured card to start building her credit, but I have a few questions / concerns about that.

We're not really worried about the longevity of any card she gets in the beginning because we can always find a better rewards card later (and I'm just not learning that we're supposed to have 4 each, so I'm sure we'll be adding more on soon). What concerns me is that every single one of the secured cards recommended on this site either monthly or annual fees. Some give you the first year for free, but eventually you have to pay to keep the card active. This means that we will eventually be canceling the card, and so it will do nothing to help establish her credit history and boost her average age of accounts (Yes many secured cards have an AF, and some of the unsecured cards also have an AF. Closing the accounts after several years does not have a negative impact on average age of account as it will still report for up to 10 years and if you are lucky longer.).

Is there any other way to get her started on a credit path that doesn't require starting out with cards that will do nothing for her score in the long run? Is it possible for her to get a "real" credit card with only her history from being listed on my credit cards? Is there anything else that we should be looking at? Yes just wait until the few things on her report age and give her a score, once score is established and she has some history from being on your accounts she can apply for CC's are on her own.

Also, I assume that we will need to work fairly aggressively to get her credit accounts established as soon as possible so that we have time to let her accounts age before we start inevitably house hunting. It sounds like the minimum time period we are looking at is 6-7 years to get all the accounts set up and age them to the recommended 6 years. Is that right? You do not have to wait 6 years for accounts to age to apply for a mortgage. 1-2 years (i forget) of good history is usually sufficient.

Thanks in advance for any advice!

Re: Limited Credit History, How to Get Started

Anonymous — Tue, 07 Dec 2010 07:50:02 GMT

Hello again,

If I were you, I'd give it a little more time. Let the AU accounts show up on her reports first and then see where you are at. Is she on your AMEX card? How old is the car you put her on? She wouldn't happen to be a student would she? If so, she might be able to get better deals on student cards.

Depending on what your accounts do for her scores, she might not have any choice but to accept a secured card or a card with an AF at first. In any event, she definitely needs to seek out a builder card. Capital One has a somewhat shaky reputation around here, but one thing is for sure, they are willing to lend to people with less than stellar credit (for a fee and a high APR). Others in that category are HSBC, Merit, Credit One, Juniper, Orchard etc. Again, these cards have shaky reputations, but they will get the job done.

Eventually, she will probably have to shut some of the cards down due to high fees, but this actually won't hurt her score very much. The age of the accounts and the positive payment history will remain on her reports for up to 10 years. On the other hand, some of these cards will graduate to unsecured CCs or CCs with no AF and lower APRs. You have to do your research here.

So, a building plan might look something like this:

Add her as AU on your oldest CC account
Wait 6 months then try to pull her credit reports and FICO scores
Depending on the information there in, app for secured cards and / or high fee, high APR cards
Exercise responsible credit practices with these cards ( allow no more than 2 to report a balance of 9% or less and pay in full each month) for several months to a year
Pull her reports and FICO scores again to check her progress
if her scores are significantly improved, app for cards with no AF and mid to low APRs
Once those cards are active and reporting phase out the high fee / high APR cards (you may or may not want to keep these cards as some lenders will graduate them into higher tier CCs)

That is just one scenario of many. Customize, rearrange, or complete ignore it.

HTH

Re: Limited Credit History, How to Get Started

smallfry — Tue, 07 Dec 2010 10:46:08 GMT

You really only need 3 credit cards. Have you tried Capital One?

Re: Limited Credit History, How to Get Started

Anonymous — Tue, 07 Dec 2010 15:41:36 GMT

I was in the same situation as your wife a few years ago when I immigrated to the U.S. Here's how it worked for me: I had a bank account with PNC but would always be turned down for their credit card because of no credit history. One day, I explained this catch-22 to my bank teller. She was nice and professional and called up their credit department for me while I was at my local branch. Then, they approved my PNC credit card for an initial limit of $1000 without strings attached (no annual fee etc.). I had no history at all and yet got a "real" credit card as my first card.

You could talk to the bank you and your wife are banking with and explain the situation. Also, you could become a member of a small credit union and see if you can find an understanding loan officer/teller who will do something for you. As my case shows, if they WANT to, they can give you a card without credit history.

Also, you might apply for a credit card jointly. I don't know if it will work but with your (I assume good) credit it might be approved.

Secured cards or cards with high fees are a means of last resort when everything else failed. These cards take advantage of people not having any history.

Re: Limited Credit History, How to Get Started

Anonymous — Tue, 07 Dec 2010 16:34:11 GMT

Very good point! I hadn't thought of that, but depending on the bank/CU they can be very very understanding about special circumstances.

It may be worth it to get your foot in the door with a CU anyway. That way you all have established a relationship with them by the time you are mortgage shopping.

Re: Limited Credit History, How to Get Started

Anonymous — Tue, 07 Dec 2010 16:45:35 GMT

Thanks for all the informative replies. I may have spoke too soon about her credit score though. I just pulled her Equifax FICO score using the ScoreWatch on this site and it's actually listed at 645 with both of my Credit Cards listed on the account. I can't remember when exactly we added her to the accounts, but it was between 3-6 months ago. The accounts themselves are 10 months and 20 months old.

Do you think that this is enough of a credit history for her to start looking at actual real cards? I currently have her as an AU on a Capital One Orbitz Visa and an Amex Blue Cash. I was thinking about trying to get her set up with an Amex Blue Cash of her own right away since they have the best rewards program I could find. Do you think she has a possiblity of getting approved already or is that a waste of time (and credit inquiries)?

If not, I suppose I'll start looking into some of the great recommendations above. Thanks again!

Re: Limited Credit History, How to Get Started

Creditaddict — Tue, 07 Dec 2010 22:50:25 GMT

@Anonymous wrote:
Thanks for all the informative replies. I may have spoke too soon about her credit score though. I just pulled her Equifax FICO score using the ScoreWatch on this site and it's actually listed at 645 with both of my Credit Cards listed on the account. I can't remember when exactly we added her to the accounts, but it was between 3-6 months ago. The accounts themselves are 10 months and 20 months old.

Do you think that this is enough of a credit history for her to start looking at actual real cards? I currently have her as an AU on a Capital One Orbitz Visa and an Amex Blue Cash. I was thinking about trying to get her set up with an Amex Blue Cash of her own right away since they have the best rewards program I could find. Do you think she has a possiblity of getting approved already or is that a waste of time (and credit inquiries)?
If not, I suppose I'll start looking into some of the great recommendations above. Thanks again!

She might be good enough for a Zync card now... but I think trying for her own Blue would be a stretch right now.

Re: Limited Credit History, How to Get Started

Anonymous — Tue, 07 Dec 2010 23:04:32 GMT

I was actually just looking at the Zync card and couldn't figure out if there was any difference between it and the Blue Cash card. Assuming the rewards and cash back benefits are comparable, the only noticeable difference is a $25 annual fee for the Zync.

What do you get for the $25 annual fee? Does that just enable them to lower the minimum score needed to qualify (i.e. is the Zync just an easier-to-qualify-for version of the Blue Cash card for people who don't qualify for the Blue Cash)?

Or am I missing something?

Re: Limited Credit History, How to Get Started

Anonymous — Wed, 08 Dec 2010 03:21:50 GMT

@Anonymous wrote:
I was actually just looking at the Zync card and couldn't figure out if there was any difference between it and the Blue Cash card. Assuming the rewards and cash back benefits are comparable, the only noticeable difference is a $25 annual fee for the Zync.

What do you get for the $25 annual fee? Does that just enable them to lower the minimum score needed to qualify (i.e. is the Zync just an easier-to-qualify-for version of the Blue Cash card for people who don't qualify for the Blue Cash)?

Or am I missing something?

Zync is a charge card. You have to pay in full every month. All the charge cards have a fee.

Blue Cash is a credit card, you can carry a balance and pay interest when you want.

Re: Limited Credit History, How to Get Started

Creditaddict — Wed, 08 Dec 2010 03:25:26 GMT

@Anonymous wrote:

@Anonymous wrote:
I was actually just looking at the Zync card and couldn't figure out if there was any difference between it and the Blue Cash card. Assuming the rewards and cash back benefits are comparable, the only noticeable difference is a $25 annual fee for the Zync.

What do you get for the $25 annual fee? Does that just enable them to lower the minimum score needed to qualify (i.e. is the Zync just an easier-to-qualify-for version of the Blue Cash card for people who don't qualify for the Blue Cash)?

Or am I missing something?

Zync is a charge card. You have to pay in full every month. All the charge cards have a fee.

Blue Cash is a credit card, you can carry a balance and pay interest when you want.

besides it being a charge card, the blue doesn't really start to earning more than 1% back until after you have cleared $6500 in spending... Zync is 2% in all the "pack" categories that you sign up for.

Re: Limited Credit History, How to Get Started

Anonymous — Wed, 08 Dec 2010 04:16:31 GMT

@Creditaddict wrote:

@Anonymous wrote:

@Anonymous wrote:
I was actually just looking at the Zync card and couldn't figure out if there was any difference between it and the Blue Cash card. Assuming the rewards and cash back benefits are comparable, the only noticeable difference is a $25 annual fee for the Zync.

What do you get for the $25 annual fee? Does that just enable them to lower the minimum score needed to qualify (i.e. is the Zync just an easier-to-qualify-for version of the Blue Cash card for people who don't qualify for the Blue Cash)?

Or am I missing something?

Zync is a charge card. You have to pay in full every month. All the charge cards have a fee.

Blue Cash is a credit card, you can carry a balance and pay interest when you want.
besides it being a charge card, the blue doesn't really start to earning more than 1% back until after you have cleared $6500 in spending... Zync is 2% in all the "pack" categories that you sign up for.

Don't forget to add that some of the pack categories cost additional fees.

Re: Limited Credit History, How to Get Started

Anonymous — Wed, 08 Dec 2010 18:30:52 GMT

Ahh, that makes sense. Sounds like the perfect card to start with then. Do you know if Amex ever allows people to upgrade their Zync to a real CC without an annual fee, or should we be expecting to eventually close the Zync account when we are ready to get a real CC to replace it?

Re: Limited Credit History, How to Get Started

Anonymous — Wed, 08 Dec 2010 18:38:02 GMT

There is debate on upgrades for Zync. But I am pretty sure if you can upgrade it would be for another Charge Card not a Credit Card.

Re: Limited Credit History, How to Get Started

larinoriani — Wed, 08 Dec 2010 19:43:17 GMT

@Anonymous wrote:
Ahh, that makes sense. Sounds like the perfect card to start with then. Do you know if Amex ever allows people to upgrade their Zync to a real CC without an annual fee, or should we be expecting to eventually close the Zync account when we are ready to get a real CC to replace it?

Before even trying to apply for a prime card, I would start building some credit of herself first. Most issuers like to see at least six months of "own" credit history. When I came to this country in 2001, I couldn't get anything until 2003 which was when Macy's gave me my first $200 CL store card.After six months I applied for a First Premier (which is a high fee card) but a good builder card, I kept that card for almost a year, and I was on my way. I bought a house in 2005.

Secured cards are other good builder options.

Chi va piano, va lontano. (who goes slow, go further) in Italian.

Re: Limited Credit History, How to Get Started

Anonymous — Wed, 08 Dec 2010 19:44:48 GMT

Thanks larinoriani, that makes sense. Do you think the Zync card is a decent starting point since she already has some history being an AU on my two cards (both in good standing with zero issues)? Or should we look for more straight-forward Secured Cards first?

Re: Limited Credit History, How to Get Started

Creditaddict — Wed, 08 Dec 2010 19:44:54 GMT

@larinoriani wrote:
@Anonymous wrote:
Ahh, that makes sense. Sounds like the perfect card to start with then. Do you know if Amex ever allows people to upgrade their Zync to a real CC without an annual fee, or should we be expecting to eventually close the Zync account when we are ready to get a real CC to replace it?
Secured cards are other good builder options.

Yes I would put my cash into a secured card LONG before I took a First Premier card... but if all else fails, they are a way to build at a high cost

Re: Limited Credit History, How to Get Started

Anonymous — Wed, 08 Dec 2010 19:47:28 GMT

What do you mean by a "First Premier" card? Are you referring to the Zync card?

Re: Limited Credit History, How to Get Started

Creditaddict — Wed, 08 Dec 2010 19:52:08 GMT

@Anonymous wrote:
What do you mean by a "First Premier" card? Are you referring to the Zync card?

No First Premier is a bank... it's the lowest end of the credit card spectrum you can go in my opinion, but with that said after my ch 7 they were my first credit card.

the latest card first premier is pushing is $700 CL with initial fees of $175.

I would rather see myself putting $300 into a savings account with Capital One and getting a secured card, then you get your money back later!

Re: Limited Credit History, How to Get Started

Anonymous — Wed, 08 Dec 2010 20:01:11 GMT

Ahh, I see, thanks. But what do you think about trying for a Zync card as a first option? Do you think there's a chance she could get approved for that right away with her limited credit history? If so, is that a decent first step?