European in USA for 6 years, but with NO credit history in the USA. What's the procedure to follow?

Question

I have been reading multiple posts but I cannot find a comprehensive answer to my questions. I am European and I have lived in the USA for about 6 years in the last 9 years. I never had a credit card, only debit. Never bought a car (I do not want one, I bike) or asked for a loan or mortgage. I always payed my rent and utility bills on time. I saved a good bunch of money during these years, but I need a loan to buy my dream house.

I called TransUnion and they said I have no credit history whatsoever (I could not pull up a credit report on AnnualCreditreport.com). My questions are:

1. I need to build my credit history. Should I get a secured credit card or should I get a basic unsecured one, such as an unsecured Capital One Platinum, which from what I read here is given also to people with no credit score?

2. What is the maximum monthly spending limit I should ask on my secured credit What? Which is the optimum value? I have a bunch of money saved, should I deposit 40k and set a 40k limit? This answer says the higher the better. Is it true? Or is there an optimum for getting credit scores?

3. Given that maximum limit, how much of it should I spend every month to maximize credit scores? I understand less than 30%, but what is best? 3%? 25%?

4. When is the best moment to pay off my credit? Should I pay it in full?

5. This point has NEVER been mentioned anywhere: I am super busy. There is no way I am going to check every month how much I owe and manually pay it off. Is there any way to set an auto-pay? And when is the day I should pay off? Right before the deadline? How many days before?

6. I do not really understand point 7 here. What does this mean: You should keep the reported balance below 30% of the credit limit on your card. This seems to contradict with (still on the point 7 there) try to make a payment before the billing cycle ends because the bank will report the balance to the credit bureaus. If I have made a payment, doesn't the balance go to zero? How can it be 30%?

7. I guess the things above apply only for secured credit cards, right? As for unsecured, what does still hold?

Thank you.

Answer 1

I can speak from my experience as a Canadian citizen and resident with a permanent US mailing address, and my curious quest to attain US credit. As an actual US resident, you should have a considerably easier time.

First, apply for a basic credit card (e.g. Capital One Platinum). They may want evidence of your income. They will probably give you a low credit limit (like $500). They will usually increase this to $1,000 after a few months if you always pay the minimum payment or more on time. (Paying in full is best, due to the interest rate.) I leveraged this to a $4,500 credit limit within three years. (Again, I don't live in the US so a resident could probably do better.)

If you can't get a basic credit card, you will probably be offered a secured card. I don't think there's any great point to having a huge credit limit. Give them $1,000 or $5,000 or whatever is necessary to get a limit that's useful to you, and use it often.

The rule of thumb of keeping usage below 30% is to maximize your score. (This may not maximize your ability to get a high credit limit, however; the issuer will want to see you need a higher limit in order to give you one.) No one knows for sure (outside the credit bureaus, anyway) what the optimum percentage is, but 30% or so seems to be a commonly stated amount.

Pay when the bill is due. You should be able to have your issuer automatically debit your bank account when the bill is due, if this is your preference.

If you have an American Express card in your home country, you might be able to leverage AmEx's Global Transfer program to get a useful US card quickly.

One other option: talk to your US bank and ask if they can do something for you. Especially if they are handling significant amounts of your money, they will be aware of your financial situation and may be prepared to issue you some credit.

This will take time. (Alternatively, you may be able to get a decent interest rate on a mortgage despite not having much of a credit report if you make a very significant down payment on the property, to obviate the lender's risk.)

I got my US score from about 500 (neutral) to just above 800 (excellent) in four years. A true resident could do better, possibly faster, although me having a stable financial situation and being middle-aged probably helped me get my score up more quickly than a 20-something could.