This article is about establishing credit. I learned it the hard way.



Spring 1997. I had moved from Germany to the USA around Christmas and enjoyed my first Southern Californian year. While I browsed the www, I saw some ads for credit cards, clicked on them and was thrilled by the nice designs. They were issued by First USA and I was given a choice of nice pictures of them. I saw one with a nice winter landscape and wanted to have it.

It was so easy.. type in social security # .. little did I know what I started ...

Nothing happened and a week later I saw a pretty card that featured motives from the business world, looked cool, so applied for that one too.

A few weeks went by and I got two letters saying something like "insufficient credit history".

I did not really need such a card, because I still had a Mastercard issued by my bank in Germany. The inconvenience of that card is that they charge me 1% on all expenses made in a foreign currency and I have to pay it off from my account back in Germany.

After getting those two letters, my sports spirit came out, I went on the web again and had no problem applying again :-)

Another letter came soon.



What had I done wrong? I did not understand it. I had lived in Germany financially stable and was used.. umm.. to be given a chance. I knew someone in San Diego who had never had a job in the entire life but qualified for a card by their bank. I did own a home in Germany with rental income, I never had had any problems with banks before.

So I asked my friend who worked back then in a collecting agency (she has her own finance brokerage business now). She yelled at me 'how could you be so stupid???'.

* I had my address for 3 months only

* I had my job for 3 months only

* there was no record what I had done before and where I lived before

* I had applied for several cards within short time

'In other words', she told me, 'everything is wrong with you. You are bad credit. Yuck, will I catch that over the phone line?'





What is important?

* Stability (same job and address over years)

Difficult for immigrants.

* Regular payments towards existing creditors

Well, I had none. My 4 successful phone bill payments did not count. Since nobody would lend me money, I figured, how could I have creditors?

My friend recommended me to get a Target (department store) card and wait before I reapplied for a regular credit card.

I followed her advice and Target indeed qualified me for a $200 line. I forgot about the cards for a few months, since I was doing fine without one. I used my ATM card all the time.. no problems.

More than half a year later I wanted to purchase airline tickets online and was to cheap to give my German bank that 1% fee for currency exchange. So I re-applied... did not work. My friend had not told me that I actually had to use that department store card . So here comes my big wisdom of 1997:

* You need to BORROW FIRST to be respected by a bank

My friend then told me to get a Secured credit card



I did this with my local credit union. They agreed with my friend's statements that this would help me build credit. I deposited $500 and got a credit line of $500. My friend told me about secured cards that have a 1:2 or a 1:3 ratio. (1:3 means that if you deposit $500, your credit line is $1500.)

I did not really care that much and used the card frequently. Less than a year later, I applied for an unsecured card (www again) and got approved.

End of story.







Here is some common sense

* do not bounce checks

* do not make late payments (phone, utilities). They will report if you are a bad customer, but they will not report, if you are a good customer.

* do not apply for credit frequently. It makes you look desperate. This includes applications at x.com. Basically everybody who requests your social security number is suspicious.

* do purchase things on payments.

I hate this advice! Upon arrival in California, I had bought a 12-year old car and paid cash. Big mistake. Buying a car is a good way to get a creditor.

* Know that Discover card is useless to build credit.

Like utilities, they will report to the agency only the bad customers but not the good ones.



A list of creditors for the beginner

* secured credit card - this worked best for me. It has a real value.



* department store card

no deposit needed, limited use. (I did not visit that store very often)

* gasoline charge cards

easier to get than real credit cards and useful.

* buy your car on payments

I don't know whether that dealer would have sold me on payments, but for immigrants who need a car anyway, it's worth a try.



Good luck!

About the author:

Mr. Tiemann was born and grew up in Western Germany, where he got a masters degree in Computer Science in 1991. In 1996 Mr. Tiemann moved to Silicon Valley to the roots of the internet revolution . This article reflects his personal experience as an immigrant with America financial system. You can read more of his articles on Personal Finances at his web site: http://www.delphifaq.com/outside_the_cube_finances.htm