Probably the most important thing that you will need to do when you arrive in the US is to establish credit. After 6 months you will have what is known as a credit history, and after one year you will have a credit rating. Actually, you can have a credit rating even before that, but it almost amounts to nothing when you're just a newbie. Depending on how well you maintain your credit (credit history), your credit rating will determine whether you will get good rates on future credit cards, car and housing loans.
If you had read my original post If You Want to Emigrate (Part 1) about the things you should bring with you to the US, you would probably then have brought along copies of or your actual credit card billing statements from your Philippine-issued Visa, Mastercard, or American Express, or Diners Club credit card. If these were issued by an international bank (e.g., Bank of America, Citibank, HSBC), it will be fairly easy to go to their American branches and ask for a credit card application. Inform the bank officer who will be processing your application about your Philippine-issued credit card and ask that they be included in your application because they will help the bank make a final decision as to what credit limit and APR (annual percentage rates) to give you. Of course, the lower this is, the better. Some of these banks will not take copies of your recent billing statements but will just ask you for the credit card number. Once they have this, they will cross check with their Philippine branches to find out about your payment history. If you're lucky, they will actually give you the equivalent credit limit in US dollars that you had in the Philippines.
Another easy way to begin to establish credit is through a company-sponsored credit card. Your recruiting company may issue you a credit card that they give to all their employees. They will also tell you the terms of payment on the card. I believe the most attractive one is where you don't get APR or finance charges on any purchases or cash advances made; the caveat, however, is you have to pay the full amount you owe at each payment period. If you are good at watching how you use your credit card and budgeting the payments each month, this should not be a problem for you. In the end, this actually leaves you with more cash in your pocket that's left over from your salary at each pay period as compared to the other one below.
Although a company-issued credit card that allows you to slowly pay off your balances seems to be the better deal, chances are, the APR and finance charges on this type of card will be very high, sometimes higher than if you had gone to another bank and applied for your own. The other disadvantage to this latter type is that you are encouraged to spend up to your credit limit and then pay off just the minimum each month. This practice will soon enslave you to living monthly on how much of your limit you have left so that your balance never gets lower than a few hundred more than your minimum payment (if at all). As opposed to the first type above, this will leave you with less and less available leftover cash in your pocket from your salary. So if you were given a choice on what company credit cards to pick, I strongly suggest that you ask for the one that has no finance and APR charges but allows you to pay off your monthly purchases completely. It reflects very well on your credit history if someone inquiring about your credit rating finds out that you regularly zero out your monthly balances because you pay them off completely.
If your company does not offer credit cards to their employees, then you have no recourse but to start establishing credit on your own. There are some sites that give you information on how to do this. Two helpful ones that I have found are in About.com and smartcredittips.com. (If they're not available anymore by the time you read this, please post a comment anywhere on my blog, and I will e-mail you the article.)
Some of the advice given in the 2 links I wrote above are for American citizens. I have found that applying for a gas card or a department store card (like Macy's or Sears or even Wal-mart) is considerably harder if you're a foreign worker. Here is where you start using your networking skills and get to know about the other Filipino or foreign workers in your company. Find out about other Filipinos living in your area. Ask respectfully for their advice; Filipinos will tend to give you as much advice as they can when you're a newbie to help you get with your credit. In our case, the best advice I received was to go to a credit union. There are several in each state, but not all will accept foreign workers. Some are connected to certain companies and will only accept employees of those companies as members (e.g., a teachers' credit union will only accept school teachers from a certain district). Others limit their membership to Americans only and will not even accept permanent residents. These limitations are not because they discriminate against certain types of people, but because their charter or the specific reasons they were formed were to meet the financial needs and requirements of the specific group of people they serve. It's like a co-op in the Philippines. Don't worry, though, because credit unions abound everywhere, and some even accept out-of-state members. This means that if you're living in, say, California, you could still be a member of a credit union in Texas. Just make sure you check out the credit union you plan to join at the National Credit Union Administration website to find out if they're okay.
Most credit unions will accept new members if one of their existing members recommend the new member. This was the case with us. One of my husband's friends who came here ahead of him recommended him to the Universal Federal Credit Union (UFCU), based in Texax. However, I am particularly indebted to Excelsior Credit Union* who accepted my husband's membership application also without any referral or recommendations. To me that's saying a lot. These 2 credit unions issued us our first credit cards. Although the credit limit on UFCU's card was lower than the one given us by Excelsior, UFCU granted us a lower rate on our car loan. This just shows you that you shouldn't keep all your eggs in one basket. Shop for the best rates, too. If one credit union that you particularly like is giving you a higher rate on a credit card than another one, you can always talk with the one you like and ask if they will match the lower rate the other one is offering you. Usually they will match the other credit union's rate, especially if they want to get your business. The only time they won't is if they already know something of your credit history, and the info they have isn't that good.
Another suggestion is, if you're married, please make sure to give your spouse an extension card, specially if your spouse is on a dependent visa (H4, L4, or J4). You never know: if your spouse eventually finds a job, you will be doing him/her a great favor by letting the credit bureaus know of his/her existence, even if he/she still has to establish his/her own credit later on.
Once you have your first credit card, make sure you make payments on time. If you can, try to pay more than the minimum balance each month. Even if you're tempted to, don't go on a credit-applying spree by going to all the stores you want and apply for store credit cards. Each time you do so, the stores you go to will be pinging your credit account that is now on file at the 3 credit bureaus that track all the credit ratings and histories of any person with credit in the whole United States: Experian, Equifax, and TransUnion. The more pings your account gets, the more your credit rating suffers because this is a sign you need credit badly. By the time you get to your fourth store, when that store pings your account, a response will be given to them stating that your first 3 store credit card applications have been denied. This makes the fourth store even more uneasy in giving you a credit card, because a person needing credit badly isn't good from the perspective of the credit bureaus or creditors.
Another reason you shouldn't do this is because your credit is bound to be low when you get your first credit card. Creditors want to know how good a credit risk you are first before they will lend you more. If you just be patient and wait 6 months at the very least before applying for your first store card, chances are your application will be approved right at the register. Also, if you have to get a store credit card, get it at the store you use most often. It's no use having a Macy's or Sears credit card if you buy most of your stuff at Boscov's or Target.
This advice about credit-applying sprees goes for car buying, too. If you can help it and public transportation is available where you live and work, don't buy your first car the moment you step off the boat, so to speak. Try waiting at least 6 months. This will save you the problem of having to get a co-signor or guarantor to your car loan. When you're a newbie at work, some of the other Filipinos and foreign workers will sometimes let you carpool with them. They will be more than willing to help if you are humble enough to admit you do need help. Of course, if it's very necessary because you just will not have a way to get to work otherwise, then go ahead and buy your car; just don't expect to get a good rate on your car loan, and/or expect the dealer to ask for a guarantor or co-signor on your account. We know some people who got carried away and so excited with buying a car the moment they got here that their total car monthly payments were so high, it was as if they had bought the top of the line model in the dealer showroom.
In the event you do end up with 5 credit cards, this is the time to tell yourself to stop. It would be wise to pay off the balances completely on at least 3 of these so you have more cash and leeway in your paycheck for medical emergencies and savings. Leaving yourself with more cash each payday means you will be less likely to use the cash advance facility offered by your credit cards. Once you make a cash advance on your credit card, your cash advance finance charge kicks in, which can be 15-20 percentage points higher than the APR. The more cash advances you make, the more untenable and harder it will be to pay your credit card bill.
Also, if you limit yourself to just one or two major credit cards, it will be easier to manage the monthly payments. Additionally, you can ask for better APR and finance charges as well as negotiate for a higher credit limit. A higher credit limit with lower APRs on 2 major credit cards (VISA, Mastercard, Amex, or Discover) is better than 5 or 10 lower-limit credit cards with higher APRs. Just add all the APRs on all your credit cards together and you'll be surprised at what you're paying each month and each year on charges alone. Remember, the more credit cards you have, the more likely successive ones issued later will have higher APRs. And the more credit cards and balances (loans) you have, the more of a credit risk you become, and the less likely you are to get prime rates for the more important purchases in your life, say, like a house.
Establishing credit takes time and patience. Don't let yourself be your own enemy in establishing good credit. An excellent credit rating takes several years of well-managed expenses and timely payments with some balloon payments to pay off other credit cards. It takes a disciplined mind to resist additional increases in your credit limit which, when taken, will result in you having more and more debt so that each paycheck you earn goes to pay for debts instead of going into other stuff like retirement savings or your children's college fund. Always remember to compute your bills and budget money wisely so that you still have some cash left over from each paycheck after paying your rent, car, utilities, and credit cards. If you don't, you'll be on your way to bankruptcy. Once you do get there and a credit consolidation agency has to help you manage your payments into one single payment so you and your family can survive, your credit rating goes back to zero, and you have to start establishing a good clean credit history all over again.
*Note: Excelsior Credit Union recently merged with Capital Communications Federal Credit Union. During the writing of this post, there has been no news yet of what the new name will be. The links to Excelsior Credit Union in this post are still active. Hopefully they will redirect all hits to their old website to the new one in the event they change their name and their website URL.
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