Give Me Some Damn Credit!
Expat foreigner just off the boat? Want a credit card? Good luck ..
Not long ago, I had about three hours to kill between appointments in midtown Manhattan and decided to conduct an experiment. I walked into a bunch of bank branches and posed as an expat Brit, just “off the boat” but likely to be here for the next few years looking for a bank account and a credit card. Not much to ask, you might think.
The experience was eye-opening. While they were all pretty cool with the idea of me handing my money over to them to look after (albeit after jumping through a few more hoops than any American would have to), in almost every case they balked at the idea of giving me a credit card. My character had no US credit history and they were certainly not going to bother to verify his overseas credit. Easier for them to just say no and watch me walk out the door. Even the US branch of the bank that my character claimed to use for his banking back home said that my UK credit or verified inventory of assets back home was no good here and they just watched me leave to take my business elsewhere. Presumably, they were so confident in the futility of my search that they were sure I’d be back in a week or two with my tail between my legs, begging to open an account with them.
While Americans with terrible credit histories are not necessarily always excluded from schemes by which they can get credit cards, mortgages, car loans etc., non-citizens — even those with significant assets and long-time impeccable credit in their home country — have to search high and low to avoid being treated by the credit card issuers in the same way as they might treat a twenty-two year-old student who had just graduated college with a major in First Aid and a minor in The History of Modern Dance after four years of living at home with his parents and has just started his first-ever job, stacking shelves in a grocery store. Get four or five newly-arrived expats together in a bar and I promise you that this topic of conversation will come up before the first pint has been finished.
As the conversation in the bank goes ..
XPat: “Can I get a US credit card please?”
Bank: “We cannot give you a US credit card because of your non-existent US credit rating.”
XPat: “Ok, so how do I create and build up my US credit rating?”
Bank: “By getting a US credit card.”
XPat: “Great, so can I get a US credit card please?”
Bank: “We cannot give you a US credit card because of your non-existent US credit rating.”
And so on and so on, in true Alice In Wonderland fashion. And expect the same conversation if you try and apply for a store charge card.
So what can be done? There a few remedies although all have some drawbacks.
1) Do the Boy Scout thing: Be Prepared. Prior to arriving in the US, talk to your local bank and/or credit card provider and explain the situation to them. Not all banks will be able to help you, their advice may well be to live your life while you are here by means of withdrawals from ATMs/Cashpoints linked to your existing account in your home country, pay extortionate fees and get ripped apart by appalling exchange rates. Not to mention the risk of losing all your rent and grocery money to a mugger or burglar or leaving it in the back of a yellow cab after a particularly fun night out. If your bank has some kind of significant branch network in New York, though, you might just get lucky and arrangements can be made to have a card waiting for you when you arrive. This would be based, to a degree, upon your record with your local branch via what the bank will might call its special Global, Worldwide or Expat type of account. Beware though, while this can be a very useful feature, you might well ending up paying through the nose for this service in extra fees (details of which may not always be too visible above the fine print) and meaningful minimum balances that, if violated, can carry hefty penalties.
2) Phone a friend. You can be added as an additional card-holder to the account of a (very good!) friend or family member who has an established credit history here. This can, of course, lead to all sorts of unforeseen dynamics between people, since the existing cardholder is completely on the hook for all of your expenditure and you need to make a private arrangement to reimburse him/her. Should that arrangement somehow fall apart, the friendship (or marriage) could very well follow suit in double-quick time. Friendships and money rarely make good bedfellows, although that is a topic for another blog. While this arrangement may be suitable for a relatively short stay here, it is only a Band-Aid, since you are getting no credit for your credit while you are an additional cardholder. You will be right back at square one again once you decide to try again for your own card. Tip for the married ladies, while we are on this topic, it is always a good idea to get an extra card (or maintain an existing one from before the wedding) in your maiden name instead of just being an additional cardholder on your husband’s account using a married name. You never know.
3) Feel secure. Some US banks might offer a secured credit card for what they call “newcomers”. They issue you a “credit card” with a set figure as collateral from your own US account that you open with them. You must use the card regularly and pay it off well above the level of the minimum monthly payment (if not in full), regardless of what the requirements are for everyone else. You are basically lending money to yourself, but paying any interest to someone else. What you will do is start to appear as a flicker on the radar of the three major credit bureaus (Experian, Transunion and Equifax) . If you behave impeccably with not so much as a one-day late payment, you may have a shot at subsequently being issued a proper credit card, but do not expect a generous credit limit at first and anticipate extortionate interest rates on any unpaid balances since your credit score will may still be embryonic.
4) Boss, can I have a word? Not every expatriating firm is aware of the credit cess-pool into which they are flinging their expat employees and take the view that arranging for a car service pickup from JFK and sticking you in a three-star hotel on Tenth Avenue for two weeks is all they really need to do. So a quiet word in the ear of your boss or HR department back home a few weeks before you board the plane might get you a corporate credit card which will be made available when you get here. But it is by no means a sure thing. Corporate credit card limits in the US are usually still based on the credit history of the employee, rather than the employer (if the employer is late making payments, it is the employee’s personal credit rating that takes the hit) and the issuer may well refuse your employer’s request. And anyhow, your employer might not want to you to commingle payment for client expenses with shampoo and conditioner on the company card and this could even raise a red flag with the IRS if they happen to see what are blatantly personal charges scattered all over a corporate account statement.
A reputable credit development specialist can help you build credit from scratch in the most efficient and time-saving way possible. These guys know the tricks of the trade, what the agencies are looking for etc. and can guide you on how to move from a credit basket case to a lender’s delight in a matter of months.
Once you are lucky enough to get yourself on the credit ladder, then visit www.annualcreditreport.com for information about free access to each of your three main credit reports (tip: request one from a different agency every four months to keep a closer track) and go to www.myfico.com which is a great source of information about how credit scores work, what factors are considered most heavily and how to not screw up.
Good luck out there!
