Establishing credit history in the USA: bank accounts & credit cards

As newcomers to the country, we don't have any credit history in the US or a Social Security Number (SSN). This means we will not be approved for things like credit cards, bank loans, cell phone contracts, or leasing/buying a car. In many cases, this also means having to put down a security deposit so that they have some of your money in case you run out on them. This security deposit ranges from $50 for internet, $205 for power & water, $500 for cell phone contract to an additional month's rent. I don't know about you, but I don't like the idea of any of my money being held hostage for any amount of time.

I don't know the full scope of this but to eventually qualify for an SSN and have any hope of maybe one day settling in the US, you need to either be employed or to build up a credit history. We entered the US using our I-20 paperwork (issued by the school) which gave us our F1 (student) and F2 (spouse of a student) visa status. Eventually I will write a post just on visas, once I get around to learning all about them (doesn't sound like fun though, does it?), but for right now all you or I need to know is that we are not allowed to work here in the US so getting an SSN through employment is out. So that leaves us with establishing credit history. Enter your first Catch-22: you can't get a credit card without an SSN, you can't get an SSN without a credit history.

The Dashew Center for International Students & Scholars at UCLA offers a handbook which goes over a bunch of different topics on life in the USA for international students. I haven't had a chance to read through their stuff (which I'm sure is very helpful) but for now here's the section on banking. And here is our experience:


Setting up a US bank account 

We went and set up our bank account during our first few days here. Normally banks don't give you an account without an SSN but UCLA is partnered up with Chase Bank so they will overlook this for you. I get the feeling that other banks also would if you bring a fair sum of money ($10k more or less?) to open up an account.

Supposedly Chase will give you a $25 bonus if you mention the Dashew Center when you open an account, but we were told that that's only for students 17-24 years old... However, you could check online for promo codes and I've also--after opening our account, naturally--found postcards in the flyer bin by our mailboxes for a $200 bonus when you open a new checking account, so it's worth looking around.

So we just walked in, sat down with a personal banker (you may need to make an appointment depending on how busy they are), gave him all of our documents (passports, visas, school paperwork, bank statements), signed a bunch of things, and we were good to go with our new debit cards. Once we moved in to our apartment, we went back and updated our address and ordered checks. I don't know about other banks but we only had to give Chase our permanent address in Canada to set things up--or should I say, they would only accept the address that was linked to our photo ID's anyways--but I remember in the UK they would only give you a bank account once you had a home address (another Catch-22: no home address, no bank account; no bank account, can't sign rental agreement...).

TIP: They don't advertise this but with Chase you are not charged any monthly account fees for the first two months. I don't know if they have always done this or if it's a new thing. So we went for the most expensive "Premier Platinum" checking account which is normally $25/month (waived if you keep >$75k in the account but we for one are lucky if we have $75 in the account let alone $75k) and includes some great perks like free checks (normally $18.95/book!), no fees for cashier's checks/money orders, no fees for incoming wire transfers, and no-fee withdrawals from other non-Chase ATM's (though the other bank may still charge you). Start off with this account and order your checks, do all the heavy banking you need to (which is usually the first couple of months anyway when you move to a new place), then downgrade to the basic plan before the two months is up. Even if they do start charging the $25 fee it's still worthwhile to start off with this at least for the first month because you'll break even after a checkbook and a cashier's check to pay your initial rent/deposit.

Getting a US Credit Card

Okay, this part is a bit trickier. Not only do we not have credit history in the US, but as a student (and a spouse to a student who is not permitted to work), we also had no income. Awesome. Can we have credit cards, pretty please? No? Okay.

We did have a little bit of savings and Chase said that if we each had $10k to our names, then they will submit an application which will be denied but which they can re-submit for special consideration. I went in to start this process a few weeks ago, got our rejection letter pretty quickly, and haven't heard back yet about the special consideration part, but I'm guessing it was a no or we would have seen our cards in the mail by now.

Lucky for us, we have been American Express customers for the past 8-9 years in Canada and they have a Global Transfer Program that considers your existing Amex history in one country in order to approve a card for you when you've moved to another (I don't know if other credit card companies have a similar process so you'll have to look into yours and find out). I have always loved American Express customer service: you never have to wait too long on the phone (today they pretty much picked up immediately), you always get a real person who can actually speak English, and everyone I've ever spoken to has been friendly, courteous, and helpful. My Starwood Preferred Guest American Express card will be in the mail in the next 10 days. Awesome. (More on the SPG card in another post, I've had it for many years, it is the best travel/hotel rewards program out there).

Finally, from what we've been told by our personal banker at Chase, the way to build credit history is actually to NOT pay off your credit card bill in full each month (which I have always done) but to leave 15-25% of your credit limit as a balance on your card for the first six months or so. This is counter-intuitive to me but apparently shows the powers that be that you can manage the money you borrow and pay back. I am fine with doing this with the Chase visa card which is interest-free for the first 15 months but I don't like the idea of paying interest on anything so I'll have to look into this more if we don't end up getting the Chase cards.

P.S. I will write a separate post another time on the best way to get your money from your home currency into US dollars, at least, like all of my posts on this blog, on our personal experience thereof.

[2012/11/23 Update]

Apparently Citibank and Bank of America both let you open bank accounts without a SSN/credit history as well, they're just not affiliated with UCLA and therefore not as widely advertised.

Also, our application for the Chase visa card has come back denied so we applied for the "Forward" visa card from Citibank instead. This is a credit card designed specifically for students without a SSN/credit history in the U.S. and gives you up to $2000 credit limit to start with, no annual fee. Purchases are interest-free for the first 7 months and then 12.99% APR after that. We walked into the Citibank branch in Westwood, Mike filled out the application, showed his passport, BruinCard, past couple of bank statements, and that was it. The card should come in sometime next week.

I also learned that until you get a SSN, whatever credit history you do build does not get submitted to the credit bureau as an official record, so until you get a SSN and attach it to your file, having and using a credit card will not help your credit ratings, even though you are technically building credit history.