Economics and FinanceLicensing And MarketingUSACredit History: what it is and how to create it

Newspaper: IT. Magazine – Italian Trade – IACCSE publication.

The concept of “Credit history” is very important in the United States as it is not only linked to the request for credit cards and mortgages, but to almost all the financing operations that are undertaken in the economic and financial American system.

Credit History refers to a person’s reliability when applying for a loan and paying it on time, the number of times certain payments (telephone, electricity, TV, gas, etc.) are made late, or possible defaults in such payments.

The Credit History can be understood as the “economic reputation” of the applicant and has important implications in everyday life. Having a bad personal history in payments means not only being considered a person at risk to obtain a loan,  buy a phone, a house, a car or other goods but sometimes also being discarded among possible candidates for a job position. In practice, it represents the main yardstick on a person’s financial responsibility.

Information about a person’s credit history is linked to his or her social security number (Italian fiscal code) and checked by various rating agencies. The main ones are Equifax, Experian and Trans Union, names well known to all those who live in USA. These agencies manage the credit history of all American citizens and provide a score (the minimum is 300 and the maximum achievable is 850) when required, keeping track of all financial transactions undertaken or unfulfilled. The Credit Report may include information about a person’s previous credit status, current debt level, the years since the Credit History was established, the type of credit card in use, the request for new credit, the presence of any defaults, bankruptcies, judgments, and other similar information. If the Credit Score of your Credit Report is low, typically below 620 points threshold, a mortgage for the purchase of a house or a car can be denied or will be granted at much higher interest rates, compared to those with a high Score.

Federal law requires Valuation Agencies to provide free credit history reports every 12 months to those who request it. The request can be easily made using the website

However, the report does not contain the final score which can be requested for a fee.

The main factors that determine an individual’s financial reputation.
The factors considered in a person’s Credit History are many, but the main ones can be summarized in the items listed below:

  • Punctuality in paying bills and mortgages;
  • Amount of money that must be returned in relation to one’s income;
  • Time of existence of a bank account in your own name;
  • Type or types of credit in use;
  • How often and how many times a credit has been requested;
  • Presence of jverdicts and judgments regarding unfulfilled or contested payments.

How to Establish a Credit History for a Newcomer
The financial credibility of an individual is based on his ability to repay the loan requested and / or on his punctuality in making a payment. Anyone who has just arrived in the US, regardless of their economic status. it must demonstrate this credibility through a slow and gradual process.

In order to establish a good Credit History and, therefore, maintain the “economic reputation”, we suggested as follows:

  • Opening a bank account – this is the first step to establish a financial history in the United States. Although this is not reported in the credit report. Some bank details are often required when applying for a credit;
  • It is advisable to put bills under your name and always pay them on time; apply, prior to credit, for all those cards whose requirements are easier to meet – for example: credit cards of petrol stations or those relating to local retail chains such as Target. CVS, Macy’s, GAP, which are generally easier to obtain. Paying your monthly debt regularly helps create a good credit history. This facilitates the subsequent request for a real credit card;
  • Letters of employment, pay slips and other similar documents help strengthen the credibility of the credit card applicant;
  • Having a co-signer – getting to know someone who already has a good credit history and is willing to offer themselves as a guarantor- is a good step to establish good financial credibility.
  • Another advice to avoid is not holding many credit cards at the same time since applying for many credit cards in a short time span could be interpreted as an indicator you need a lot of credit and, consequently,  of financial problems.

First step: opening a bank account in the USA
A US bank account can be opened  with a simple procedure by both non-US resident individuals and legal bodies.

There are two main types of bank account: the checking and the savings, which differ primarily according to their purpose of use. The checking account is a deposit account for daily transactions that allows withdrawals and deposits. The money held in this type of account is very liquid and can be withdrawn by checks, at the bank’s ATMs (ATMs) at no additional cost, by debit cards and other methods.

The savings account is a savings deposit account with a modest interest rate. The key difference between the checking and the savings account is that the former can be used on a daily basis to issue checks and request debit cards, while the latter is mostly used as a liquid profitable asset. US bank accounts can also be distinguished according to the subscriber; in fact, you can have a personal current account for individuals or a business account (the so-called business banking account) for legal entities, such as companies.

For those people in possession of a visa or a green card, and therefore with a tax residence in the US, opening a current account requires you to go to the branch with a passport and your Social Security Number. Many American banks also allow non-residents, called “non-resident aliens” (without a Social Security Number) to open a current account. Simply go with a passport and a valid identity document. By law, banks must carry out a series of procedures and checks in order to meet the required security requirements. At the end of this procedure, the current account is opened and a debit card is received. For the opening of a business banking, the presence of a partner or even all the partners of the company are required with different signatory powers and documentation depending on the legal nature of the company. The common requirement for all types of companies is the possession of the Federal Employee Identification Number (EIN); if not provided with this, the company must apply through the IRS website which corresponds to the Italian Revenue Agency.

For each company form, the business status must be marked as “active” or in “good standing” on the State Secretariat of the state website in which the company operates. The prior preparation of a “corporate resolution” is strongly recommended, a document that is used to give shareholders a mandate to carry out banking operations in the name of the company. In addition to this, it is necessary to know that any banking document functional to opening a current account must be stamped with the company’s stamp. Florida, thanks to the growing influx of foreign investors, is among the North American states, one of the most prone to opening current accounts by non-residents.

By Giancarlo Pelosi

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