How to Build Credit in the U.S. If You are an Immigrant?

Thursday, September 26th, 2019
Updated: September 26th, 2019
The content is accurate at the time of publication and is subject to change.

You’ve just successfully moved to the United States and it seems it’s finally time to breath. No such luck! No, we don’t want to frighten you. You shouldn’t take alarm and pack up your things back. Still, you’d better clearly understand that having good credit is just essential here and you can’t just stand aside. To help you adapt faster, below we answer the most frequently asked by immigrants questions about credit building:

I don’t Plan to Buy a House. Do I Need to Build Credit Then?

An average American has about 3-4 credit cards in their wallet. The reason is that your credit history may not only determine how big credit limit on a credit card you can figure on but whether you get a longed-for job, a nice apartment, a good car, and even an ordinary cellphone plan. So, yes, you’d better spare no effort in order to build healthy credit.

I Have a Credit History in My Country. Does It Count?

Unfortunately, the credit history you had at your native land won’t be taken into account. You will have to build your credit score from scratch, as U.S. credit reports collect credit account activity only from U.S. credit card issuers and lenders. However, it is possible for immigrants to develop high scores in a fairly short time. All Americans once also start from the very beginning and most of them succeed.

What Should I Know About Credit?

Once you open your first credit account, the issuer starts reporting your credit activity to the credit bureaus. In America, the three major credit bureaus are Equifax, Experian, and TransUnion. The credit bureaus not only store information about your interactions with financial organizations but convert it into a three-digit number that is called credit score. Its most common type is a FICO score with the range between 300 and 850. You should aim for at least 700 points which separate good credit score from fair. But the higher your scores, the better.

How Long Will It Take Me to Build Credit?

One thing to get the hang of is that the credit-building process is not a moment’s work. You just can’t see 700+ scores the next day after opening your first account. It may take about six months of financial activity only before a credit score can be calculated. Anyway, many newcomers starting with absolutely blank credit reports achieve a positive score within a year or so.

What is Necessary to Begin Building Credit?

Most credit products are available for applicants of age 18 and older that have a Social Security Number and can prove their income. Thus, first of all, you will need to obtain an SSN, a unique number assigned to Americans and authorized for employment immigrants to identify and record their earnings. If you are not eligible for an SSN, you may request an Individual Taxpayer Identification Number, or ITIN. Some issuers accept it instead of an SSN.

Besides that, most issuers will demand you to have an active checking account or debit card. There are a lot of different offers to consider. So just take care of opening one in advance to avoid a fuss when it comes to applying for credit.

What Credit Product Should I Apply for First?

Of course, applicants with no credit look pretty risky potential borrowers to issuers. Thus, you can’t typically expect to be approved for a regular unsecured credit card with a big credit limit provided by the bank. Nevertheless, there is a special type of credit cards for starters that require you to provide a deposit of $200-$500 beforehand. They are called secured credit cards. After using one responsibly with no late or missed payments for 8-15 months, you will be able to get your deposit back and probably switch over to an unsecured credit card to continue improving your score.

Another option is personal loans. They imply that the lender transfers all borrowed money to your account at once, and then you gradually return it in set monthly payments at a certain interest rate. Both of these ways are good for establishing credit.

What Principles Do I Need to Adhere to Grow My Score?

To build and keep up good credit, you should always remember about 5 main factors that make up a credit score: payment history, credit debt and its utilization, length of credit history, new credit, and credit mix. The most important thing is to always monitor your payments and do your best to make them on time. Then, try to keep your total debt under 30% of your available credit. Next, as your credit history is short, don’t apply for too many new accounts, they can reduce the average age of your credit history, which can also impact your credit score. Also, consider having a mix of credit cards, personal loans and other kinds of credit accounts. If you follow these rules of maintaining your balances in good standing, your score will be gradually increasing opening up new opportunities for you.

All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.

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