skywalkerLAX

Another example how stupid the credit system in North America works !

You have to owe money to be eligible to owe more money... and if you dont have a start (like when you move to the U.S. from another country) you get nothing. I have my primary residence in europe and when I came here I did not even get a mobile phone contract or stuff like this because my new SSN had no credit record.

In germany for example, if the database says the customer has no existing credit but also no bad credit he is clean. And you get a new credit if you can proof an employment status or something. Far more customer and reality oriented in my opinion... sorry for OT !

rrgg

A lot of foreign nationals at my company have complained about this. However, your proposal means the client is assumed to have a clean record in his home country. By the way, everyone born in the US starts out in the same situation. One solution is to get someone to cosign your loan or credit card to help build your credit. That person is vouching for you with the bank. That seems pretty reasonable.

kebosabi

How to get more miles out of your credit card's account limit

VERY OFF-TOPIC, But that's why there are those over-excessive Capital One credit cards that they practically give away to anyone. My advice to my friends were:

1. If one's own bank offers a credit card that can be tied to his/her accounts, get that one first and use it for the first year.

or

2. Get one of those high-interest rate credit cards from Capital One and the like and use it for the first year (pretty tricky and requires constant checking of balances because the credit limit is very low; like in the 100s, and they hit you with OTL fees because even if one kept it under the balance, the interest rate dings it up over the limit.)


After he/she uses that card for a year, she'll have credit good enough to get a better mile/point earning credit card. In fact, my friend is constantly irritated with credit card offers in her mail these days.

grahampros

True. Credit Score and Income are not linked directly. The more unused credit you have, generally, the higher your credit score. One of the biggest factors determaining the credit score ( or FICO) is % of total available credit used. The lower the %, the higer the score.

However, credit score is only one variable that a credit grantor can use. High credit score, but low verfiable income relative to available credit can cause a rejection. However, this has become less and less common. Credit scores have become an excellent predictor of risk, so many creditors place most of the weight on the credit score.

grahampros

No apploggies for the U.S. credit system. History has been proven to be the best predictor of future payment patterns. The U.S. screws a lot of things up, but credit risk is one area that we excell.

Though, I do understand your frustration.

ricktoronto

Really? Have a close look on your ill guided home equity loan industry or non-prime lending banks and you can see how badly those portfolios were underwriten and how totally stupid the credit risk policies were and are.

Also take a look at your defecit and national debt (and who holds it) and your dollar value.

rrgg

So this all is due to the personal credit rating formula?

Does that mean Canada had a really bad formula 10 years ago? And now they use a good one?

brettyokom

Also, like any other merchant who accepts credit cards, AA gets dinged a tiny amount each time they try to run a card through the Visa/MC/AmEx system, so this loophole/fraud carries a cost for them, and then is subsequently passed on to all of us.

jragosta

The same thing applies in the US. A credit check will tell the bank immediately that there's no credit history - either good or bad.

The difference is that in the US, it has been statistically determined that this is a very high risk situation which has a high probability of ending in loss for the bank, so they tend not to do so. German culture may be somewhat different.

A typical US citizen has infinite opportunities to borrow money (and even legitimate reasons to do so) even from a quite early age. Knowing that you're going to need a car loan or mortgage some day, anyone with even a modicum of financial knowledge starts building a credit history early. If you're over 30 and don't have a credit history, the risk is quite high.

There are, of course, exceptions. The one you've cited (people moving here from another country) is one. Another is the recently divorced spouse who hasn't worked for 20 years and has no credit in his/her own name. (My ex is currently trying to obtain a mortgage, so we'll see how it works. So far, it looks like the system is going to handle her situation just fine).

However, I would argue that inability to deal with exceptions does not make the entire system faulty.

skywalkerLAX

Thanks for your advise ! ^ In next life I will do it like that...

I talked to the BoA branch where I had an account already 4 years before I moved to the US and they made a deal with me, so it finally worked out then.

Dave Noble

Fortunately in Australia and , I assume, germany the credit companies are not allowed to build up information about a person other than such issues as logging that a request for credit info was made, overdue debts, defaults, judgements et al. If there is no negative information about you ( and that you havent already applied for lots of credit ) then getting credit is not too hard.

I do not see how statistically, someone who has not had credit is likely to be a bad risk. People may have lots of opportunity to apply for credit, but I hardly see that people using a lot of credit is a positive thing

Dave

jragosta

Since we're talking about statistics, it doesn't matter whether you understand WHY it works that way or not. It just is.

But in America, someone who reaches 30 without any credit history is often (not always):
Independently wealthy - in which case getting credit shouldn't be a problem
Recently divorced - a possibility I discussed above
A deadbeat
Homeless
Unable to hold a job
Etc

It's not hard to understand why those things would be a bad thing.

jragosta

The issue here wasn't the assignment of risk. For all we know, the credit agencies DID properly assign risks. The problem was the same thing as our Internet bubble in 1999/2000. People assumed that real estate would continue to grow at double digit rates indefinitely, so it was 'safe' to offer credit even if the rating were low. The banks essentially said "sure, this is a bad credit risk, but even if I have to repossess the house, it will be worth 20% more next year than it is this year, so I can't lose".

So, it was caused by stupidity, to be sure, but not a failure in the credit rating system.

I guess I'm having a hard time understanding how this has ANYTHING AT ALL to do with personal credit rating policies.

brp

Well, all other things aside, it would be hard to argue that the credit system in the US works by any stretch of the imagination. Mortgage defaults (and the subprime market) is clearly a disaster (as mentioned previously). The billions of dollars of credit card debt and the many people making interest-only payments is embarrassing. I would certainly not speak proudly of the credit system in the US. At least not with a straight face. If one looks only at their own situation (I've never not paid off a CC bill within the allowed period and never missed a loan payment) and ignores the reality around them, it may be possible to think all is well. At some point, though, it's necessary to take one's head out of the sand to breathe.

Cheers.