Saturday, September 08, 2007

Credit Worthiness

Two aspects of life in US that any young college-bound people should heed are credit history and health insurance. The first is for one to build up, and the second is to purchase. Often the second one is taken care of as part of the university registration requirements that pay for medical costs for treatment/consultation at the Student Health Center. That leaves the first aspect to the devices of the individual students.

So today we brought our daughter to a local Bank of America (BOA) office to start her maiden step toward financial responsibility: opening a checking account and applying for a student credit card. BOA has a special facility for college students: 5-year free checking and a credit card limit of, well, let’s just say it’s a generous amount considering that she is a freshman (or dare I say, a freshwoman?).

Perhaps it has been adjusted for inflation, I’m not sure, but her credit card limit is more than her elder sister's and brother's when they first started off, 4 years and a year ago, respectively. Come to think of it, it’s even more than what I was offered by none other than BOA more than three years ago when I first came to work in the States.

I did have my credit history built up while I was a grad student at Gainesville, but apparently any credit history more than 3 (or is it 5?) years old does not count (I’m not sure whether the same consideration is extended to bad credit history that one can just start from a clean slate if one just drops off the radar screen of the credit bureaus for the same length of time).

And my impeccable credit card history accrued in Malaysia does not matter either. So there I was, a fully and legally employed professional in US, was only able to secure a secured credit card, i.e., one that requires a fixed deposit equal to the credit limit in the bank. And today, my daughter was offered a student credit card, unsecured. I can’t help but thinking that the banking institutions here seem to treat a fresh college student with no working history better than one who has earned advanced degrees and has been working for the past two decades, at least in terms of credit worthiness. Anyway, I’m happy for her, and I am glad that I was able to help give her a head start toward financial independence.

Credit worthiness is an indispensable part of daily life here. The credit score, which is a measure of one’s credit worthiness, determines the amount and the interest charged on a loan. I remember when I first started with a zilch credit history, meaning my credit-worthiness was non-existent, I had to dole out a big chunk as down payment toward payment for a new car, another essential item here. And I was charged an interest rate of more than 10%. Subsequently, that has come down to a respectable 6% when I refinanced after 1 year.

So, credit worthiness, and health insurance. One secures our financial future, and the other guarantees our access to affordable healthcare.

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