Getting a credit card in the U.S. without a U.S. credit history

Americans love credit. Trouble is, you need an American credit history to get an American credit card, and you need American credit to get an American credit history. You can see where this is going.

The two easiest ways to solve for this problem would be to have U.S. credit card providers look at applicants’:

1. ) Pay stubs (cheques), or
2. ) Non-U.S. credit reports (yes, commerce also occurs outside of the U.S.)

Sadly, these two options are unlikely to happen any time soon. To solve for this in the meantime the path of least resistance is to take out what’s called a ‘secured’ credit card.

Think of a secured credit card as a hybrid between a debit card and a standard credit card. You transfer the total amount of money you wish to draw down on to the credit card provider up front, they issue you a ‘credit’ card, and you can then use it to pay for things up to the ‘credit’ limit you set. As you are using credit to purchase these things, credit bureaus then begin to give you a credit score. Once you have a credit score you can apply for a standard ‘unsecured’ credit card.

Through this process, you basically are earning the privilege to have an institution baby-sit a pool of your own money to gradually spend using a piece of plastic, and in so doing receive the collective nod from the financial system to do normal things like rent an apartment.

There are a lot of secured credit card providers to choose from. A site called Credit Karma is pretty decent for options. I opted for one that had the most up-with-the-times (read: online) application process. It’s amazing that institutions like Chase and American Express still ask customers to apply through the lethal trilogy of paper forms, fax and the U.S. Postal Service.

I applied for a Unity Visa Secured Credit Card offered by a community bank called OneUnited. They also happen to be America’s largest black-owned bank. I came across them through my work and was pleasantly surprised at how simple the entire process was, from application to approval and physically receiving the card.

OneUnited Bank’s Unity Visa Secured Credit Card. It’s a ripper.

You can apply for a credit limit of anywhere between $250 and $10,000, remembering that you must stump up these funds if approved (they simply withdraw them from your bank account electronically, if you choose). They also have a fixed interest rate of 17.99% and report to all three of the credit bureaus: Equifax, Experian and TransUnion which is important in building that credit score.

I applied online for the card on a Saturday, was asked to submit a pay stub online one hour after I submitted my application which I did immediately, was approved pending funding on Monday which went through on Wednesday and had the card in my letter box the following Friday — just two weeks in total.

While it is a pain to even need to go through this process in the first place given I have a stable U.S. job and decent-enough Australian credit history, my first few months with this bank and credit card have been pretty painless.

I now enjoy the fun task of monitoring my credit report which is different from my credit score. Credit reports reflect how often you make payments on time and how many accounts you have in good standing. This information impacts whether you are approved for ‘unsecured’ credit cards, mortgages, car loans or any other loans, and even the interest rates credit card providers will offer you. Yes, if you have had trouble for any reason servicing debt in the past, they may increase your interest rate.

The one that often stings people new to the U.S. and my primary reason for wanting a credit score in the first place is that even landlords look at your credit score when deciding to rent to you. If you don’t have a credit score at all you simply represent risk to a landlord or property manager. After all, who knows why you wouldn’t have credit history — what are you really hiding behind that lack of U.S. debt?

San Francisco? Or a sea of declined rental applications just waiting to happen?

Checking your credit reports regularly can also help you spot errors or signs of possible identity theft. Yes, you can be really put out by someone stealing your credit card and making Pablo Escobar proud at the till. View your credit report for free here.

So what are you waiting for? Join me and millions of Americans in the snake pit of capitalism. It’s one hell of a financial system. I’m only ankle-deep so far and have yet to be bitten*.

*stay tuned for future anti-venom posts.