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How Do I Establish Credit as a New US Citizen?

Question – John, I was wondering if you had any advice for my wife who is originally from Colombia. She has been in this country for 4 years now and so far, she has no credit history. She’s never held a credit card or any kind of credit account in this country. We do share a joint bank account. What is the best way to establish credit as someone new to this country. She does have an SSN and expects to become a citizen in the next 5 to 6 months.

Answer – I’d add her as an authorized user to one of your existing credit card accounts. Choose one that has a long history of on time payments and a modest balance relative to the credit limit. Normally this would result in a record of that account being reported to the credit reporting agencies, thus creating a credit report for her. However, the fact that she isn’t a citizen yet could delay the process. It doesn’t sound like you’re in a big hurry to get this done so I’d wait until she has become a US citizen and then add her as an authorized user. Good luck!

John goes on CNN and chats with Christine Romans about credit card debt

Should I Replace a Credit Card That Doesn’t Have a Credit Limit

John
I closed a Platinum AmEx because the unlimited credit limit actually shows up on my credit report as $0 credit. I opened an AmEx Blue account instead. Was that a good move?

Answer
If your goal is to get an account on your credit report that actually helps your revolving utilization percentage then yes, good move. If you’re referring to the Amex Platinum charge card then it’s not being considered for that percentage in the newer scoring models. You now have a new inquiry on one of your credit reports that could be hurting your score a bit and you will have a new account on all three of your reports that will also probably hurt the scores a little bit. But, in the grand scheme of things having lower utilization is much more important and actually having a card that shows a high credit limit is a good move. By the way, your old Amex card really does have a limit. It’s called a “shadow limit.” Do you really think you can go out and charge an unlimited amount of goods or services on that card?

John’s Mint.com video about whether or not you should take out a loan to pay off credit cards

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