Take the 2-minute tour ×
Personal Finance & Money Stack Exchange is a question and answer site for people who want to be financially literate. It's 100% free, no registration required.

I am a student on a F1 Visa in the US.

Being a non US Citizen and on a student Visa, I am unauthorized to work off campus, and so I am restricted to work upto 20 hours a week on a hourly wage and have no fixed monthly income.

I have a SSN through my on campus job and have been working on-campus for 6 months now, depositing my pay cheques monthly to my account at Chase.

I would like to establish credit history - have heard it's useful to gain employment and makes it easy to rent an apartment?

When trying to apply for credit cards, the forms from the banks assume you are working on a monthly salary or a guaranteed number of hours - hence I have not applied for any cards till now as I am likely to be turned down.

I tried to pull my credit report through CreditKarma but they could not locate my record, asking me to check if I entered everything correctly.

Is it safe to assume that this implies I have no history whatsoever?

I have approached a local credit union that suggested that I take out a cash-secured loan.

Is taking out a secured loan the only way for me?

If so, I have a few questions:

The minimum loan they give out is $250

The rep there recommended that a larger loan amount is more favourable to my history.

  1. In that case maybe a $1k would be a good balance?

  2. Should I take out $1k as a single loan or four $250 loans? Would this decision matter?

  3. What loan term should I select? A year, two years, ..?

  4. This CU can give me a rate of 4%, but I was wondering if there are other CUs that have better rates for a rank newbie like myself?

Am I making a right decision by taking out this cash-secured loan?

Would it make much better sense to wait till I get a job (then I would have a fixed monthly salary and can apply for a regular CC directly)

This is going to cost me a lot of money and effort and I wanted to be sure that this route is really worth it.

share|improve this question

3 Answers 3

up vote 7 down vote accepted

I would like to establish credit history - have heard it's useful to gain employment and makes it easy to rent an apartment?

Higher credit scores will make it easier with landlords, that's true. As to employment - they do background checks, which means that they usually won't like bad things, but won't care about the good things or no things (they'll know you're a foreigner anyway).

Is it safe to assume that this implies I have no history whatsoever?

Probably, but you can verify pulling through AnnualCreditReport, don't go around giving your personal information everywhere.

Is taking out a secured loan the only way for me?

No, but it's one of the easiest. Better would be getting a secured Credit Card, not loan. For loan you'll have to pay interest, for a credit card (assuming you pay off all your purchases immediately) you will only pay the credit card fees (for secured credit cards they charge ~$20-100 yearly fees, so do shop around, the prices vary a lot!). If you're using it wisely, after a year it will be converted to a regular credit card and the collateral will be returned to you with interest (which is actually very competitive, last I heard it was around 2%, twice as much as the online savings accounts).

As to a secured loan - you'll be paying 4% to CU for your own money. Doesn't make any sense at all for me. For credit cards you'll at least get some value for your money - convenience, additional fraud protection, etc. The end result will be the same.

Usually the credit starts to build up after ~6-12 months (that's why after a year your secured CC will be converted to a regular one).

Make sure to have the statement balance in the range of 10-30% of your credit limit, to get the best results.

Would it make much better sense to wait till I get a job (then I would have a fixed monthly salary and can apply for a regular CC directly)

You can apply, but you'll probably be rejected. As I mentioned in another answer elsewhere, the system in the US is such that you're unable to get credit if you don't already have credit. Which is kindof a magic circle, which you can break with the secured credit card as the least costly solution.

share|improve this answer
1  
@f1StudentInUs - they'll do a credit check, so? The whole point of the secured credit card is that it is for people with no credit or bad credit. They'll want to know which one you are, but why does it bother you? $50 fee is a lot, try to check in other banks or CU's, as I said - the price range is huge. Remember that you'll offset some of the fees with interest on your collateral, so don't for get to ask what the rate would be, it also changes from place to place. –  littleadv Jul 16 '11 at 0:00
1  
@f1StridentInUs - just checked at Wells Fargo - they charge $18 for a secured credit card. wellsfargo.com/credit_cards/secured –  littleadv Jul 16 '11 at 0:02
1  
@f1StudentInUs - ignore this. I know plenty of folks here in the Bay area on H1/L1/F1, not one of them was ever rejected because of the status. Just bring your passport to the bank, and you'll be good. –  littleadv Jul 16 '11 at 0:29
1  
@f1StudentInUS - you can start with accepting the answer :-) –  littleadv Jul 16 '11 at 1:33
2  
Second the advice to check around. my first credit card was a secured card from my credit union, secured by a minimum balance on my share (savings) account equal to the credit limit on the card. the fee's were negligable. and yes, accept the answer, click on the empty checkmark you see below the up/down vote items for the answer. (that's something only the person who posted the question can do) –  Chuck van der Linden Jul 16 '11 at 7:01

I would like to post a followup after almost a quarter.

littleadv's advice was very good, and in retrospect exactly what I should have done to begin with.

Qualifying for a secured credit card is no issue for people with blank credit history, or perhaps for anyone without any negative entries in their credit history.

Perhaps, cash secured loans are only useful for those who really have so bad a credit history that they do not qualify for any other secured credit, but I am not sure.

Right now, I have four cash secured credit cards and planning to maintain a 20% utilization ratio across all of them.

Perhaps I should update this answer in 1.5 years!

share|improve this answer
    
NOTE: statement balance != balance reported to CRA. Eg: DCU reports to CRAs your card balance as on end of month, which might not be your statement balance. –  f1StudentInUS Mar 14 '12 at 20:23

I think you should try to talk with the credit union at your campus first, they may have offer you a credit card even you don't have any credit history.

share|improve this answer
    
Do check out my reply posted as an answer. Should I have put this into my question instead? –  f1StudentInUS Sep 21 '11 at 4:12
1  
@f1StudentInUS It's sometimes more appropriate to update (edit) your question. Only answer your own question if you are adding a new answer. –  Chris W. Rea Sep 22 '11 at 22:02

Your Answer

 
discard

By posting your answer, you agree to the privacy policy and terms of service.

Not the answer you're looking for? Browse other questions tagged or ask your own question.