Monday, March 8, 2010

Why I don't have a phone in US yet? Blame it on Credit History

:Image:IPhone_Release_-_Seattle_(keyboard) cro...Image via Wikipedia
I have been in the US for three weeks now, and when ever my friends ask me a phone number, I tell them I still don't have it. The reason is that I can't buy the phone I want. I can buy other phones, but don't want to. I want to have an iPhone. But there is some concept called Credit History in US.

Credit History - What does it mean? Here in US, all the good phones need that you take a two year contract with them and they subsidize the price of the phone. For example, a completely new unlocked Nexus one costs $599 whereas the same phone costs $159 for the same mobile with a 2 yr contract with T-mobile. So as they are giving you this subsidy, they expect to use this mobile and keep paying the bills for two years, but they are not sure of this. How do they make sure that you will be able to pay for the two years. That is where the concept of credit history comes into picture.

To quote from Wikipedia,

Credit history or credit report is, in many countries, a record of an individual's or company's past borrowing and repaying, including information about late payments andbankruptcy. The term "credit reputation" can either be used synonymous to credit history or to credit score.

So that means, they will analyse our past spending behaviour and then decide whether we are credit worthy. If so, then they will sell us, otherwise they don't. But for immigrants come from other countries, there will be no credit history available to us. So we cannot buy anything initially in the US. Whatever you want to buy on credit, you will have tough conditions, like you can still buy an iPhone but you have to pay a staggering $500 deposit.

The same process of verifying your credit history is done even for any credit purchases like home, car or even applying for a credit card. Yes, you heard it right - You cannot get even a credit card without a credit history. Now you are caught in a vicious cycle, now you don't have a credit card because you don't have a credit history. And then how are you supposed to build a credit history??

Enter Secure Credit Card: This is just like a debit card, except it is called a secured credit card, what it means is that you will have to deposit initially some $300 and you will get a credit card with that limit. You can spend till that amount and you will have pay that amount within some time as you do for a normal credit card. Overtime, you credit history is built up and then you will qualify for purchases based on the developing credit history.

My friend says that it will take atleast 3 months before I can buy an iPhone without paying deposit. So I will not be getting a phone till then, but before that I think I can buy a vonage phone. Its great that Vonage doesn't check for credit history.

Though, it helps to have a credit history, can we not make it easy for people who are going to stay in this country for some time. It might be possible if our parent countries can share the credit history information with this country. I think this can be built as web service, anybody interested?

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