Ask a Canadian: Guess What? You need to build your credit score

Though the credit score folks are best known for their data breaches (a couple of years ago, Equifax exposed 147 million consumers’ personal information) and some argue that the whole system is broken, credit reporting and credit scores are part of the consumer business DNA in the United States.  

Your credit here affects pretty much everything financial you do: getting home or car loans, interest rates on credit cards, your ability to rent an apartment.

By and large, your credit history will not transfer from Canada, which is both good and not so good.  Good in that it is rather nice to know that one entity doesn’t know all about you globally (well I guess Google, Facebook, Huawei and some Russian gangsters do but there isn’t much you can do about that).

The lack of connectivity between the Canadian and U.S. financial systems is not so good in that you will have to build a credit history down here.  And the United States works somewhat differently than Canada, where an oligopoly of five major banks run the show.

So, how to do this?  A couple of ideas, some my own, others cribbed from financial advice websites.

Get a Couple of Credit Cards

As soon as possible, deposit money in a bank account and setup a secured credit card at the bank tied to that credit card.  Use the credit card to no more than 30% of your limit and pay it off regularly.  Prior to 9/11, it was pretty easy to set up a bank account even if you lived outside the United States but this has gotten more difficult to do.  You’ll likely need proof of residency (Visa, green card or passport) and a social security number to do so now.

Image result for variety of American Credit cards

If you don’t have an American Express card in Canada and have more than a few months before you move South of the 49th parallel, get one and use it regularly.  Then, when you move here, apply for a new U.S. based American Express card.  Amex is one of the few financial entities that will take into account credit history outside the U.S. when applying for a card here.

If Amex doesn’t work for you, you should be able to land a second credit card through a merchant (e.g. Amazon, Target, Ikea). They’re hungry for your business - they want you to buy stuff! - so the qualification process is often pretty easy.

Get a Secured Car Loan

Buy a car using a loan secured against the full amount that you set aside in a standalone bank account.  In fact, you likely will not need to secure the entire loan amount - car dealers want to move product off their lots so you should be able to cut a deal based on a couple of months worth of pay stubs.

You can pay the loan off in 3 - 6 months and this will help solidify your credit score.

Be Squeaky Clean in Your Financial Dealings

Pay your bills on time.  The major credit reporting bureaus - Experian, Equifax and Transunion -  now look at utility and cell phone bill payment histories to score consumer credit.

After a few weeks in the American credit system, you will be showered with credit card offers.  Avoid opening and closing multiple credit card accounts, keep yourself down to two cards, at most three, at least for the first year here.  Then, if so inclined, you can ramp up and start playing credit card arbitrage, joining consumers who have figured out how to work the luxury credit card network to actually make money.

 A Final Word

Since the great recession, the Canadian debt to disposable income ratio has handily outstripped the U.S, so it seems that once prudent and cautious Great White Northerners have entered the world of credit fueled living.  Chart from this financial blog.

Nonetheless, consumer culture feels different down here and can be quite liberating.  The consumer is king, choice and price in everything from groceries to clothes to automobiles to dining to travel is broad and the system makes it very, very easy for you to buy stuff.

Therein lies the rub; we have found that it takes a new kind of self discipline to keep our purchases focused on what really matters to us and not clutter our lives with stuff that, while purchased at a great price, just isn’t all that necessary.

Hugh Morgan grew up in Calgary and has lived in the Bay Area for 27 years.  He’d be delighted to answer any questions you have about life in the Golden state: you can reach him at hugh.r.morgan@gmail.com.

The views, thoughts and opinions expressed in this article are solely those of the author (s) and do not necessarily reflect the views, policies or positions of the Digital Moose Lounge.