I felt pretty "trusted by definition." Citi gave me a credit card with a $3,000 limit as a college freshmen. A few years later I had an $8,000 limit card and a $10,000 limit card.

I bought my car certified-pre-owned under a program that writes favorable low-cost loans to recent college graduates with no or limited credit history (with an offer letter or paystubs).

You just aren't trusted with housing-sized amounts of money until you demonstrate responsibility with smaller dollar values first.

>basically creating debt and then paying it off

This depends on your definitions a little bit. You don't need to carry a balance and you certainly don't need to pay interest. You just need to create low but nonzero utilization on a credit card, pay it off every month, and not do anything else that might screw up your credit. I suppose you have debt in the interim between making the charge and paying it off, but most people don't consider it to be "credit card debt" if it goes away between statement cycles.

As a recent immigrant I felt pretty untrusted. In my late 20s, despite being able to show a year of income in the six digits, no overdrafts, I had to go to four separate banks before finding one that was willing to give me a $300 limit card.

I mean, it's not great, but you have to start somewhere, and I've only been here 9 months. Was very frustrating to have to start from scratch when I have good credit in my home country, but completely understandable.

The really frustrating thing is how your credit score influences everything - apartment hunting, mobile phone contracts, etc. That's the only reason I'm trying to build my credit at all here. It feels like having a bad credit score puts you at a distinct disadvantage in the US, which is something I've never felt before.

It makes logical sense. Is it fair? I don't really think so, but its at least logical.

So there are other ways than the US one.

How old are you? Just a few years ago, despite making a very decent amount of money and having no marks on my credit, it took an entire year for me to get a credit card. Reason: lack of credit history. A lot of people have similar stories.

>This depends on your definitions a little bit.

The part where you spend money that isn't yours and then pay it off later. That's debt.

Personally, I've learned the game so to speak and now continually get out outrageously good offers for cars, credit cards, home loans, you name it. I have a about $90k~ worth of available credit to me on my CC's alone. But despite having an incorrect black mark for a medical bill that's reported by _ONE_ CRA (the others removed it after I gave them proof that the debt wasn't valid, Experian refuses to listen and because it got reviewed once they won't review it again), I get better offers now than I did when I had a squeaky clean record.

It's an absurdly backwards system. Get debt to get more debt. Hope CRA's don't fuck anything up. Credit card management has no indication how I'll manage a loan (whether a house or car) due to the nature of spending and utilization, but financial institutions treat it as such.

Quite frankly we need "stricter" credit laws across the board.

1. Start out with a "default" score at the very least.

2. Cap interest rates on CC's (20% APR is stupid). No reason a CC should have an interest rate of above 12%.

3. Don't allow medical debts to be displayed in pulls from CRA's. If the institution really wants to see "everything", make them pay a decently high fee for it. They must also explicitly state that in their loan consideration for you, they took into account medical debt. Craft laws around whether or not financial institutions should be able to consider these debts, depending on the loan being offered.

4. Prevent employers from pulling credit history. Your finances are not their business.

5. Prevent landlords from pulling credit history. They are not loaning you money. If they want to pull your credit history, then they need to also contribute to it positively (i.e. report payment history during the length of your lease, accurately).

I disagree, if you have a terrible credit history, leasing to you may be very risky. They aren't loaning you money, but they are trusting that you will have the money every month to pay them with.

Even more importantly than that: the lessor gives the lessee custody and (limited) care-taking responsibilities over what, in most cases, represents a significant investment of capital.

it's me, the tenant, who is loaning money to my landlord.

I don't really understand why, but it's way easier to get a credit card with no history if you are in college. People who would easily be approved as a senior in college will get denied 12 months later. It's stupid that it works this way, but some of the best financial advice you can give a college student is "get a credit card before you graduate."

> 4. Prevent employers from pulling credit history. Your finances are not their business.

This resonates intuitively with a lot of people (myself included), and is actually the law in 11 states. There are some interesting subtleties that should be considered before making up your mind though. In brief, the practical impact can make things _worse_ for some demographics often assumed to benefit from this type of legislation. A mass market article: https://www.washingtonpost.com/news/wonk/wp/2016/03/23/the-l...

The original research: http://scholar.harvard.edu/files/shoag/files/no_more_credit_...

> 5. Prevent landlords from pulling credit history. They are not loaning you money.

If all goes well, they aren't loaning you money. However, in most states it takes at least a couple of months to lawfully evict a non-paying tenant. So landlords are implicitly offering to loan tenants a few months rent.

I think the actuary-types who design the scoring models would disagree vehemently with this one. Scoring models are built from regressions on actual default rates.

It's one thing to say "I see you've been late on a few of your car payments, so we're going to give a higher interest rate." and it's something else to say "You have a few unpaid medical bills/late CC payments so we're going to give you a higher interest rate on this car loan."

I just have a hard time really believing that is the case. Often credit issuers simply look at the totality of everything, instead of appropriately looking the history of the specific financial contract they're wanting to issue.

That doesn't mean that systematic failures can't happen, but they're pretty unlikely. It's much more likely that you underestimate the correlation between these disparate defaults than that the banks overestimate it.

This quite literally happens already.

How many cards do you have? I understand it's mostly theoretical but I'm wondering why would anyone want to use their high-interest credit card to borrow even a few tens of thousands? Or any high-interest vehicle of debt for that much money, for that matter.

>but I'm wondering why would anyone want to use their high-interest credit card to borrow even a few tens of thousands?

I don't know, but I'm sure as heck not going to utilize them that much! I am sure the credit issuers wish I did though.

Some credit cards have promotional low or no interest rates for a year or so. You can then balance transfer to another promotional rate card at the end of the year. Also many issuers (Barclaycard, AMEX, Capital One) have low or no interest rates for active duty military.

Here are a couple ideas: lawyer fees during a contested divorce and emergency spending from being out of work too long.

I never understood this - why is someone else asking for your credit history a ding on your credit report? It seems really silly to me, but I must be missing something.

Inquiries only affect your credit when they're from someone whom you've authorized to pull your credit as a potential creditor: https://www.nerdwallet.com/blog/finance/credit-report-soft-h...

The way it works, is they usually only give someone a $500 limit, then double the limit every 6 months If you pay monthly.

Once you get a job you can get a bump to $2000 limit with the 1.5% back easy. You just need to get a job for that.

I'm 1.5 years out of college and have access to ~100k in credit cards with a score of 750. I started with a score of 540 1.5 years ago. It's really not hard at all.

My credit report (free from my bank) tells me my score is slightly lower than it would ordinarily be because of how short the card history is. I still get a couple "pre-approved" card offers every week and the occasional offer to raise a limit, but I just shred them.

It increases your score because you have a lower credit utilization and you have more available to you (supposedly signaling how responsible you are).

I just have a lot of cards. If they want to give me bonuses for signing up I will take them. Free money.

Plus usually you can call and get the second year free too.

Regardless, I can cancel w.e. and the increase in my credit score is worth it. At the moment if I want to buy a house (for example) I get the best rates on loans

At this point, I have enough credit from credit cards alone to buy a small house.

It doesn't matter how many times you swipe your card, you can get a card and never use it and and still counts for your credit history. The point being you have credit available to you but you aren't using it. You have four years of not running up your credit card, that's huge.

EDIT: Huh, apparently I've been ill-informed about credit history [1]. Guess I've been a dumbo and one of today's lucky 10,000.

[1]: https://www.reddit.com/r/personalfinance/comments/188xmi/is_...

FICO is based on your credit utilization (amount owed vs credit limit), history of repayment, mix of types of accounts (this has a minimal impact), number of new accounts, number of credit inquiries (aka hard pulls, this is also minimal), and length of credit history.

You had credit available to you for four years and you manage it very, very well.

Other scoring algorithms besides FICO may weigh different things differently but FICO is currently used in most lending decisions so it's what matters for now.

If you want to see your real Experian FICO 8 credit score for free you can do so at freecreditreport.com which is a site now owned by Experian. They break down each part of your credit score and grade you on each. (A-F)

This is not something that you can have different opinions about it's how the US credit history system works by definition.

Not saying one is better than the other, it's just how it works in the US.

- Credit card utilization (balance as a percentage of available credit at last statement close)

- On-time payments (you just have to pay the minimum required by the date specified for it to count)

- Derogatory marks (collections, bankruptcies, foreclosures and liens)

- Average age of accounts (this favors older people who have been using credit a long time but not opening a lot of accounts recently)

- Total number of accounts (also rewards a mixture of types - car, student, credit card, mortgage, etc)

- Hard inquiries (very slightly dings your score if you're currently looking for credit, punishes you harder if you're desperately applying to everything you can find because this indicates financial emergency and therefore high risk).

https://www.creditkarma.com/article/credit-score-factors

If you use CreditKarma, it'll explain all this and how the values on your credit report fit in to the averages.

I am in no way affiliated with freecreditreport.com, it's just a site I find incredibly useful. It's now owned by Experian and it gives you your Experian FICO 8 credit score. They break down each part of your credit score and grade you on each. (A-F)

There's other sites like credit karma that do similar but they use vantage score which is also known as FAKO score and isn't used by lenders but is a good indication of what your FICO score may be.

I am not talking about credit card history but about history of being a US citizen, having a bank account etc.

I think a lot here are missing the point.

The question is not about your credit score but about getting the credit card to begin with. Once you get the card they assign you a credit score but in order to get it you have to start building debt (and as a foreigner I had to do that with my own money)

You also don't have to start building debt. Having a credit card you don't use is enough.

Unless: Someone has them cosign for a loan or credit card. This is somewhat common with a first car loan or some student loans, but less common with credit cards. They won't be able to do that if they have a low score.

Otherwise, you are basically on your own. The credit stuff you would have experienced coming here is what many 18-year olds hav to deal with. Some older women find themselves in a similar position - the accounts were all in their husband's name.

Perhaps one's parents can't help in any formal way, but for me, my parents' creditworthiness and relationship with a local bank helped get me my first credit card.

Right before I left home for college, I applied for a credit card with my local bank, and was initially declined. When I asked for reconsideration by the branch manager, he looked into the situation and indicated that he couldn't do anything to assist.

When my mother found out I was declined, she took me back to the branch, and asked the branch manger to reconsider the credit decision. Upon a review of my parents' standing with the bank, the branch manager overrode the previous decision and I was given a Visa card with a moderate ($1000 USD) limit. My mother wasn't even asked to co-sign on the account, provide any kind of guarantee, or be associated with the credit card in any way.

With regards to credit score, of course, I never said it did.

With regards to getting a first credit card thats simply not true. Maybe if you go into a bank and open an account but if you have had a relationship with that bank for several years it is going to help you get one to begin with. Of course it helps you if you have had a history with the bank. And of course there are americans who can't just get a credit card thats still not what I am talking about.

I know plenty of 18 year olds who never had to deal with what I had and no matter what it doesn't really change anything from my original claim which is that the US credit history system is built on distrust not trust.

Citibank offers customers credit cards based on how much they have on their savings account. So it's simply not true that history doesn't help. Of course it does as it should.

I did not have that, or any cosigned loan.

Instead, they will issue you a 'secured' credit card, where you get a $300-500 limit on a card against the same amount paid to the bank as security. Only after a year or 2 of this, will the bank actually issue credit.

Maybe you had an account/history with the bank for a while, and that made a difference?

I don't understand exactly why I am being down-voted.

The system is at it is it's not something I made up.

But please point to where I am wrong about the credit score system.

> You are american you have a history and your parents have a history.

Parents have nothing to do with anything unless your parents cosign or add you as an authorized user on their cards. Being American has nothing to do with anything other than some cards require you to be a US citizen for some reason, my BVAA card does for example. My parents are scumbags and their scummy-iness doesn't effect my ability to build credit.

The trick is to apply for the right card, different lenders/products target different populations. A store card or a secured card is a good start in building credit, that's what I did when I was young and had practically zero income. My limit was like $300 but it was enough to get me on the map. I didn't have to deal with being rejected because I applied for the product that fits my life situation. If you just apply for the heavily advertised cards you are not going to get a good result. After that I applied for a crappy card I was "pre-approved" for that came in the mail. Once you have a credit history you're going to get offers in the mail unless you opt-out.

Getting a charge card (which is not the same as a credit card) may be an option too, not sure on that one.

>The question is not about your credit score but about getting the credit card to begin with. Once you get the card they assign you a credit score but in order to get it you have to start building debt (and as a foreigner I had to do that with my own money)

False, you don't have to have any debt to get a credit score. Having credit available to you you don't use is enough.

First you say

>You are asked about assets, income etc. but those things have very little effect on whether you get a credit card or not.

Then you say:

>I wasn't talking about credit history but about history as in, a customer in a bank for years. These are also factors for how easy/hard things like this is.... There is a difference between being a US citizen having had bank account most of your life and then being a foreigner who just got yours.

Those things are mutually exclusive and both can't be correct.

>There are plenty of other ways to credit companies could gauge inside your economic maturity as much of your financial history have been done via debit card for more or less the same transactions that you are going to use your credit card for... You are not suddenly going to become financially irresponsible just because you get credit

This is beyond false and laughable. Nobody gives two craps about "economic maturity" they want to know "is this person likely to pay back the loan?"

>Second it's a fairly know issue that the way creditscore is established is pretty flawed.

It has its limits but are you questioning actuaries that crunch these numbers for a living? I mean, I'm assuming they have a reason and numbers and there's data to back it up and they just didn't say "lol, lets make up some shit." If they were getting bad results and losing money they'd change the algorithm.

> I live in the US so yes I have a pretty good idea of how it works.

Almost no Americans have any idea how "the system" works, its very specificity knowledge and there's tons of myths. You know how many times I've heard people say "my credit is terrible, its around 750?" 750 is an excellent score. People get credit reports confused with credit scores and all kinds of "I heard," "I assume," etc.

The very fact that things like how much you have on your savings account can affect your ability to get a credit card disproves your claims.

You might yourself be the one who have "heard" and is "assuming" things which plenty of other commenters in this thread shows.

As a personal anecdote, I avoided credit cards until age 31, but had a bank account with Wells Fargo since I was 16. Because I had no history, almost no one wanted to give me a card despite my high provable income. I got my first credit card with capital one (for a hilarious 300 dollar limit).

But two months later after I became a known credit card user I started getting credit card offers in the mail from a variety of sources -- Wells Fargo offered me considerably more credit than the others, presumably because some system of theirs thought I was more trustworthy (long-standing account history? Actual visible income in the bank account?) They even offered me a rewards card even though I only had 1 month of history.

This has to do with your chance of getting a credit card to begin with. There is a difference between being a US citizen having had bank account most of your life and then being a foreigner who just got yours.

Not sure why you keep insisting I am saying something else than I am.

I don't think it's accurate to describe the system as starting out not trusted. There are many levels, and misbehavior can easily give you worse credit than the default. You start out neutral and then go up or down depending on what you do. Which seems like exactly how it should be.

There are plenty of other ways to credit companies could gauge inside your economic maturity as much of your financial history have been done via debit card for more or less the same transactions that you are going to use your credit card for.

In other words the information is there already because you have been using your debit card already.

And yes it is accurate to describe it as not trusted which is why you need to increase your credit score by using your credit and paying it back.

Credit score is one of many pieces of information used in lending.

Alternative credit scores are starting to come on the market for people who pay bills on time but may not otherwise have a traditional credit history but they are pretty experimental still. There's different algorithms too. The current one used most often is FICO 8 but there's a LOT more.

Each lender has their target borrower too. Some lenders are what is called subprime lenders meaning they lend to people with low or limited credit histories.

Debit card use makes no sense and is irrelevant.

You are asked about assets, income etc. but those things have very little effect on whether you get a credit card or not.

Both scenarios are fundamentally impossible with a debit card, so I really don't see how there's any relevance here. It's not the purchasing end that they're interested in, it's the paying-it-back part.

Thats not really important here.

You are not suddenly going to become financially irresponsible just because you get credit and yes you can determine someones financial responsibility by looking at their debit card usage that is why you can actually convince someone if you get rejected to look at your case again to show them additional information. This is why you can get a credit card in citibank if you have 25K in your savings account for 3 months straight and so on.

A ton of people suddenly become financially irresponsible just because they get a credit card. It's a massive problem, and that's why companies want to see some history. Being responsible with a debit card where there are hard limits on how irresponsible you can be doesn't mean a whole lot for how you'll be with a credit card.

The problem with people using the credit card lies as much in the incentive structure of getting points, building credit etc.

And it's obviously speaking against your claim that so many american have issues with their credit cards given that the very test your claim is necessary is failing on so many.

So no I understand the balance pretty well.

Uhhhhhh... You haven't been in the United States for very long, have you?

But you can't see the forest for the trees.

You can't go into debt using a debit card because you are spending your own money you already have.

These are much better indicators of your ability to handle money than spending money and paying it back to build credit history.

Again it works in other countries and so of course it can too in the US.

You could instead just look at the history of their debit card usage to figure out whether they are trustworthy.

As I said though I understand why they do it, it's just not a very useful model IMHO but because it's big money and it's complex to change it most probably wont for now.

First of all, you can have an excellent credit score without paying a penny of interest. All you have to do is buy things with your credit card, and pay the bill in full when it arrives. You will never pay any interest when you do this.

Second, the people who measure risk for a living have determined that people's history with small amounts of debt is indicative of their ability to manage larger amounts of debt. Do you think their actuarial models are incorrect, and if so, why?

Furthermore, it's not like a good credit score is all it takes to get a mortgage. Proof of income matters too. As anyone who bought a house since the 2008 debacle will tell you, mortgage lenders take great pains to verify borrowers' income and the source of the money they use for their down payment.

> You could instead just look at the history of their debit card usage to figure out whether they are trustworthy.

No, you really can't. A debit transaction is a direct deduction of money from a checking account -- it is not debt. The only thing that can go wrong is an overdraft, and even when that happens, the payee will probably be unaware of it. Debit is more similar to cash than it is to credit. People have very different psychology and behavior when they use debt instead of cash.

There are plenty of problems with the credit system in the US, but the things you have identified as problems are not real problems.

Second it's a fairly know issue that the way creditscore is established is pretty flawed. You can have 10mio on your account, but if you have no job or own your own company it will actually affect your credit score. This whole thread is started because of some of the issues.

With regards to the debit card the point is that the kind of purchases you did before you got a credit card, aren't going to change dramatically or fundamentally after you get one.

That's not true. Your FICO score does not take into account your employment status, nor your income.

> With regards to the debit card the point is that the kind of purchases you did before you got a credit card, aren't going to change dramatically or fundamentally after you get one.

If that were true, it would contradict your earlier argument that "most people don't use it like that which is why it's such a good business." Your statements cannot both be true.

I don't think it's backwards. Debt is only a bad thing if you're being irresponsible about it, so it's like a weedout test. In the other system, can you just buy a house on credit with no credit history? If so, I just find that hard to comprehend.

Also, re: your comment about foreign people, my dad had no issue with it, but maybe you're saying people that are not yet citizens?

If we want to avoid debt "accidents", only letting people with demonstrated experience seems like a good solution.

A provisional license offers both supervised training and effectively delays entry into the unsupervised insurance pool by a year.

After this, location (e.g., ZIP Code, in the US) and miles driven are the biggest predictors. Latter are why insurance companies will do almost anything to get ahold of odometer readings.

Source: Worked on auto insurance risk products.

A lot of people don't realize this I think but if you hold a balance, especially over whatever percent of your total credit, it hurts. The moment I paid off all my cards my credit score jumped and all my limits increased.

You could learn about peoples financial maturity through simply checking their normal debitcard/bank transactions.

Does he/she pay is monthly rent, is he/she constantly hitting zero on their balance etc. None of this require credit card usage.

For instance paying your rent on time. I.e. something that can be proven other ways than using your credit card.

Being non-american I went trough this and have a pretty good idea on how it works and some of the myths.

I guess some of the confusion is around the before/after a card.

I had to basically fund my own credit for some time and pay it off. All which cost money of course.

As a foreigner thats how it's normally done. At least in a bank like Citibank.

And you would never have been in debt.

2) Shred credit card

3) Now you have a credit history

(They'll probably close your account in a year of inactivity if you don't use it but you'll still have credit history until the account falls off your report-10 years)

Citation required because debt is not the same thing as money, so associating them together like you do with your assertion requires something more than just your illogical statement.

I live in the US and I grew up in Denmark.

Both systems allowed me to have credit cards, rent apartments, buy a car etc, but only the US system forced me to do that by creating debt to show that I could be trusted with debt.

In other words large parts of the world do in fact associate them and aren't like us in the US debt ridden.

The American economy, and largely the world economy is based on accusation of debt.

If everyone in the US, or other First world nations simply started living with in their means, never incurring debt the entire of the world economy was cease.

Thus the credit system is design to reward people that acquire more and more debt and punish people that save or live frugal life styles with in their means

The modern economy depends on a person gathering debt from their 18th birthday until their death, where the assets of their life are then sold to cover those debts ensuring the next generation also has to acquire debt repeating the cycle.

Remember our banking system in U.S. pays politicians to create laws that benefit them. It's actually not much a stretch to even claim they own the country between ex-bankers doing the regulations, bankers paying off politicians, bankers getting bailouts, the Fed, and bankers obviously controlling financial backbone of economy. So, I always consider whether this could have impacted a law, standard practice, or whatever.

Well, one thing they like is you buying stuff with their money and paying interest. It's basically how they all make money outside things like fees and services. Guess what our "backwards" credit system forces us to do. You were absolutely correct if you guessed "guarantee billions in profits for bankers." I'm not sure if they created the original model but it should be on list of possibilities to consider given they pull lots of stuff like this.

Another example they probably paid politicians for is how they do tax write-offs on charged-off loans they're not going to collect. The reasonable parts are them not paying taxes on loans they can't collect and borrower paying taxes on amount they borrowed because it's effectively income. The sneaky modification they also write off the interest and fees they charged on top while borrower pays taxes on those as if they were income. Interest and fees certainly aren't income. This scheme works great for banks and IRS but not consumers.

I wouldn't necessarily agree with a gut reaction that positive credit scores are absurdly backwards. It makes sense that I would trust someone more as a borrower if I know they have repaid debts in the past (versus having no history at all). The system could probably use improvements and more regulation, but I don't think it's fundamentally off base.

They are trying to bring something like that to Brazil too. Fortunately, it's opt-in, at least for now.

Until you do those things, you are most likely going to get denied high-ticket loans such as mortgages and car-financing.

This seems backwards to me. The proof that I am good with money is that I have never been in debt. When I got my home loan the additional proof was having a deposit.

You have to do the same to get a mortgage in UK. And that's why I need a credit card