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My partner and I are hoping to get a mortgage and buy a house in the next few years. A potential problem is that I have essentially no credit history and thus I have a low credit rating. (My partner has a very good credit score.)

The reason is that I have never had to go into debt and things like utilities and credit cards are all in my partner's name. As an immigrant, I have no history in the US from before marriage.

The entirety of my credit record in the US is two rented apartments and a denied credit card application two years ago (because I had no credit history). Both my partner and I work and have saved up about $200k towards a deposit.

I want to know what we should do to maximize the chance that we will get a good mortgage deal 2-3 years from now.

Some more specific ideas: Does it make sense for me to take out an unnecessary loan simply for the purpose of building a credit record? Would it make sense to get a no-frills credit card? (Would I need to heavily use the credit card to build credit? My partner's credit card gets 2% cash back, so I exclusively use that as an authorized user.) Should some of our utilities be transferred into my name?

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    Could your partner carry the loan without you? When I last refinanced, my partner had a ding on his credit. They qualified me for the loan, but both our names are on the deed and the mortgage. – mkennedy Apr 15 '18 at 23:02
  • @mkennedy Maybe, but I assume it's best if we both can contribute. – user71204 Apr 15 '18 at 23:12
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    I'm not saying you can't contribute. My partner is on the mortgage and the property deed--but the loan company didn't need his credit to authorize the loan. Just remember that it's a possibility if your score isn't high enough in the future. – mkennedy Apr 15 '18 at 23:15
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Go to your bank/credit union and get a credit card in your name. If they won't give you a card based on your income, then get a secured card. Then use it. Don't pay interest, but use it and pay it off every month.

About a year later you can ask them to switch you a non-secured card, or go get a non-secured card from another financial institution.

Some more specific ideas: Does it make sense for me to take out an unnecessary loan simply for the purpose of building a credit record?

No. Don't pay interest just to build credit.

Would it make sense to get a no-frills credit card? (Would I need to heavily use the credit card to build credit? My partner's credit card gets 2% cash back, so I exclusively use that as an authorized user.)

Yes a no-frills card works great. Use it to buy your daily coffee, or use it to purchase gas a couple of times a month. Heck use it to automatically pay the cable bill. The idea to is have charges every month. It doesn't have to be a significant portion of your monthly expenses. Keep most of them on the 2% cash back card.

Should some of our utilities be transferred into my name?

You can pay the utility bill with your new card. My utility companies don't report my monthly payments to my credit file, I assume if I missed a payment they might, but that isn't a test I want to perform.

  • Thanks for the thorough answer. I'm going to try getting a basic card. I hope that is enough. – user71204 Apr 15 '18 at 23:12
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The simplest option is just to get a credit card in your own name. There are companies that specialize in cards with a relatively low credit limit, for people with poor credit.

If you pay it off in full every month, you shouldn't have to pay any interest.

  • That seems like the simplest thing to do. But is it enough? Does it depend on how much I use the card? – user71204 Apr 15 '18 at 21:41
  • @user71204 It's hard to tell, and depends entirely on the bank doing the lending. Don't take too much notice of the numeric "credit scores" that the ratings agencies make a big thing of. Lenders don't really care about them anyway. – Simon B Apr 15 '18 at 22:00
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The standard "formula" for building a credit score is to have one open installment loan and three revolving accounts. With no credit initially, you will normally have to start with secured accounts. I would suggest joining a federal credit union. You can often do a small secured personal loan for $500, then take the loan proceeds and put it back into the savings to use for a secured credit card. basically letting that $500 in savings do double duty. Once you have the first secured card and installment account, getting a second one is much easier. Capital One and Discover are very popular for secured cards. Bank of America, Wells Fargo, and US Bank all offer secured cards as well. Once you have had the secured cards for a year you should be able to get unsecured cards.

You absolutely do NOT have to use them a lot. Its best just to use one of them regularly for a small charge each month and pay it in full each month.

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It does make sense to take out an unnecessary loan. I would use a certificate of deposit secured loan or a savings secured loan and I would use the loan to buy more certificates of deposit or more savings.

Transferring the utilities into your name will only help if the utility company reports the payments to the credit bureau. Most do not. Becoming an authorized user may help a little, but you need your own borrowing history.

Let us say you are saving $1000 per month. Instead, buy a two-year certificate of deposit on credit. If the deposit rate were 1% and the spread was 2%, you could borrow $23,265 and pay $1,000 each month. You should also take the interest from the CD in cash and pay extra to pay down the loan. You had might as well use the bank's own money to pay off the loan early.

  • Thanks for the suggestion. I will need to learn more about this option. – user71204 Apr 15 '18 at 21:11

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