How to Establish Credit in the USA

A positive credit history is an asset, not only when you apply for a credit card, but also when you apply for a job or insurance, or when you want to finance a car or a home. Here are three major ways to start establishing a credit record for yourself:

• Consider applying for a credit card issued by a local store and use it responsibly. Ask if they
  report to a credit bureau. If they do, and if you pay your bills on time, you'll establish a
  good credit history.
  
  
• Consider a secured credit card. To obtain a secured credit card, you open and maintain a
  bank account or other asset account at a financial institution as security for your line of
  credit. Your credit line will be a percentage of your deposit, typically from 50 to 100
  percent. Application and processing fees are not uncommon for secured credit cards. In addition, secured credit cards usually carry higher interest rates than traditional non-
  secured cards.
  
  
• Consider asking someone with an established credit history - perhaps a relative - to co-
  sign the credit card account if you do not qualify for credit on your own. The co-signer promises (guarantees) to pay your debts if you do not. You will want to repay any debt promptly so you can build a positive credit history and apply for a credit card in the
  future on your own.

If you are turned down for a credit card, ask why. It may be that you have not been at your
current address or job long enough, or your income may not meet the issuer's criteria. Different credit card companies have different standards. However, if several companies turn you down, it may indicate that you are not ready for a credit card.

Credit grantors generally issue three types of accounts. The basic terms of these account
agreements are:

Revolving Agreement (Typical Credit Card Account)

You may pay in full each month or choose to make a partial payment based on the outstanding balance. If you make a partial payment, you will be charged interest (a "finance charge") on the portion of the balance you do not pay. Department stores, gas and oil companies, and banks
typically issue credit cards based on a revolving credit plan.

Charge Agreement

You promise to pay the full balance each month, so you do not have to pay interest charges.
Charge cards and charge accounts with local businesses often require repayment on this basis.

Installment Agreement

You sign a contract to repay a fixed amount of credit in equal payments over a specific period of time. Automobiles, furniture, and major appliances often are financed this way. Personal loans usually are paid back in installments, too.

Compare Credit Cards

Credit card issuers offer a wide variety of terms. When you see credit card offers, consider and compare credit cards terms, including the following, before you select a credit card:

Annual Percentage Rate (APR)

The cost of credit as a yearly interest rate. Low interest credit cards are a good choice for those
who plan to maintain a balance on their account (not pay the full amount each month).

Free or Grace Period

Allows you to avoid any finance (interest) charge by paying your credit card balance in full before the due date. If there is no free period, you will pay a finance charge from the date of the
transaction, even if you pay your entire balance when you receive your credit card bill.

Fees and Charges

Many credit card issuers charge an annual fee for granting credit to you ($15 to $55 for most
cards, and from $75 on up for premium gold and platinum cards); many also charge a fee for a
cash advance or if you fail to make a payment on time or if you go over your credit limit. Some charge a flat monthly fee whether or not you use the credit card.

If you pay credit card bills in full each month, the size of the annual fee or other fees will be more important. If you carry a balance, the APR and the method of computing your balance are key
terms to consider as you compare credit cards.

• Obtain all credit card terms and fees in writing, including whether a deposit is required.
• Apply directly to credit card issuers. Do not give money to a company that offers to get
  you a credit card for a fee - you may not get a card or your money back.
• Beware of "credit cards" that only allow you to buy from their own catalogs.
• Beware of companies that promise instant credit, or that guarantee you a credit card
  "even if you have no credit history." No one can guarantee you credit in advance.

When shopping for a credit card, you probably will want to look at other factors besides costs --
such as whether the credit limit is high enough to meet your needs, how widely the card is
accepted, and what services and features are available under the plan. You may be interested, for example, in "affinity credit cards" -- all-purpose credit cards that are sponsored by professional organizations, college alumni associations, and some members of the travel industry. Frequently,
an affinity card issuer donates a portion of the annual fees or transaction charges to the
sponsoring organization, or allows you to qualify for free travel or other bonuses.

Information taken from Foreignborn.com

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