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Personal Finance

How Canadians Can Establish Credit In America

I actually lived in the US for a couple of years, but foolishly didn’t establish myself financially beyond opening a bank account. I used my Canadian credit cards, never owned property and just lived my life there.

Over a year ago when Prosper.com started up and I wanted to try it out, I wasn’t able to open an account since I didn’t have a US address or any US credit history. I tried a number of ways to get established with US credit and they were all quite difficult. The “official” way to do it is you go to a bank, offer to set up a GIC (they call them CDs south of the border) and an account with them. You then get a credit card with a limit significantly less than the CD’s value (so if you don’t pay your bill they have the CD). I tried to set this up, but the bureaucracy wore me out before I could have it set up.

Department stores, credit card issuers or anyone will just turn up their nose at you when you apply and don’t have any credit (this happened to me everywhere).

There is an easy “back door” which I used (and would suggest to others, this may also work in Canada or other western countries). Basically you use a friend who lives in the country that you want to establish credit in. Together you get a joint credit card, which they’ll be able to easily get if they have any sort of credit at all. The limit doesn’t matter. If your friend doesn’t trust you fully, that’s not a problem, just get the joint card and tell them to keep both cards when they’re issued.

Then you (or your friend) charge things on the card. The amount doesn’t matter, but its good to keep something on the card (buy a latte every month and just pay it off when the bill is due). Almost IMMEDIATELY you’ll be in the credit system and will get a FLOOD of credit card offers. Sign up for one of them, and when you get the card, get your friend to cancel the joint card. I’d recommend holding out for a credit card that has no annual fee, the interest rate doesn’t matter (since you’re going to pay it off every month, right?). Rapidly they’ll increase the limit if you just use it and pay it off consistently.

You now have started a credit history in that country, your friend isn’t liable for you any more, and you’ll keep getting more offers as you use and establish your credit in your own name. I always pay my credit cards in full (along with all other bills) and got a Visa, Mastercard and AMEX early in life and have never gotten more cards (except for a gold AMEX I only use for renting cars, because it covers the insurance). When it came time to get my first mortgage, the rep I was dealing with expressed amazement at how high my credit rating was. I expect if I ever apply for a mortgage in the US, my credit should also be fairly decent.