Getting a Credit History in the US

A problem I have already alluded to is your credit history. Without a credit history, there is a lot you can't do. But it's hard to get a credit history, because you can't do stuff to get one. Some providers will give you a really rubbish credit card, where you are required to put money into an account, and then they will let you spend it on your credit card. But it gives you the beginning of a credit history.

There is quite an art to getting your credit score higher. Having credit cards, or loans (which you pay back) or bank accounts helps. And the longer you have them, the better. Having credit cards that have lots of clear balance on them helps too - the more spare balance on your card, the better. BUT you have to use the card a bit, to show that you can use it and pay it back. The ideal (I read somewhere) is to use 35% of your credit limit each month, and then pay it back.

But, don't apply for credit cards to try to get a better score, because every time you apply for a card, they run a credit check on you. And every time they run a credit check, it hurts your credit score a little. I have an American Express card, and I realised that my credit score was hurting because I was using it each month (it was a 1% cashback one), so I applied for a higher credit limit. I'd had the card for 6 months, and had religiously paid the balance every month - in fact, I was so scared of a black mark that I paid it almost weekly. When I applied for a higher limit, they didn't take this into account, they ran my credit score, which came back saying that my balances were too close to the limit on my credit card, so they wouldn't give me a higher limit. (But I wanted a higher limit...)

Then I applied for a mortgage, and found that the credit check American Express had run had knocked my credit score just enough that I couldn't get the mortgage I applied for (and because I'd applied, that was another hit against my credit score. Aaaghhh!)

In theory you can get your credit score once per year from the credit agencies, Experian, Equifax and TransUnion. They don't make it especially easy though. I now keep track of my credit with TrueCredit, which costs $15/month, but lets me keep an eye on it.

Insurance companies and prospective employers might also run a credit check, to see what kind of person you are.