Consumer credit

[mtbc]

I hear it's easier when starting out as a student but as a normal working adult in the US without any US-based credit history it is actually rather difficult to establish credit. The best course I found was to get a couple of secured credit cards where I deposit $1,000 or so with a couple of different companies and they issue me a card with a credit limit up to that cash value. A while later I can probably get a high-APR loan when buying a car through a dealer but the interest isn't too bad if it's just a cheap car paid off over a year or two, then there's that on my record too. Within a few years the card companies will have both willingly switched me to a regular credit card. I just keep using them but paying them off each month and then they keep raising the limits and all is fine. Credit cards are extremely useful in the US for checking into hotels, renting cars, etc.

By contrast it's generally been quite easy for me in the UK. With no credit history, simply being in ongoing employment with my salary deposited into my checking account seems to make my bank willing to give me a credit card after several months. Once I've been using and paying off one for a while, offers for more are easy to take.

One thing that surprises me is that I thought that the credit crisis several years ago would have tightened things up rather. But, apparently the little I have been doing since moving to Scotland is exactly right: when I was last at an appointment at my current bank they looked at their computer screen and remarked that my credit is great, though the man seemed quite surprised at that, perhaps because he already knew that I rent from a landlord. I gross under £50k but they're very ready to let me borrow £200k for a house with just £10k deposit. Isn't this kind of thing meant to be more difficult these days? Wasn't it not long ago that people were badly overextended and banks were in trouble?

Though, property prices are one reason I plan to return to the US someday: nice houses cost a lot over here, at least by my standards, as I'm not about to consider borrowing anywhere near as much as I apparently may.

Comments

[gerald_duck]

Borrowing £200k with £10k deposit on sub-£50k income is "more difficult".

Back when things were completely crazy, they'd have let you borrow £250k to buy a £200k property on sub-£50k income if you self-certified as earning £50k. They'd even have given you an interest-only mortgage with no indication of how you'd ever pay back the principal.

This may be a clue as to why things went wrong…

[damerell]

There's no risk in that for them as long as the housing bubble continues - or at any rate flattens rather than bursting, etc. As I understand it the crash was caused by partly-unsecured loans.

An extreme example of this is "logbook loans"; CEB and I talked some years ago to a nice charming loanshark [1] at B-Movie who explained, simply enough, that they expect to take possession of the victim's motor car; there's no real assessment of their ability to pay at all.

[1] This made for conflicting feelings.