How to Establish Credit in the United States as an Immigrant.
When you are entering the United States as an immigrant, it is always a great idea to begin building your credit history as soon as possible. Find how you can do this below, but some of the things to do include being added as an authorized user (I have witnessed first hand how this works and has immediate results), get a free secured credit card, open a bank account, or talk to a non-profit credit counselor. There are also other things to do that can help an immigrant with their credit ratings, and find steps to take below.
It is important to start and build credit for many reasons, including finding employment, renting a home or apartment, and more. If you ever hope to have a credit card from a lender such as Bank of America or Chase, then this must be done as well. Right or wrong, so many employers, lenders, landlords and others look at this score before making financial decisions…it is the way of life in America. It is critical for immigrants to start on the path to starting to build a credit history.
When you first enter the US, you will have no credit score, and this may cause some issues for you. It can make buying a car, using cash back credit cards, leasing an apartment, or even getting a job more difficult than they need to be if not impossible. However, with some preparation and proactive steps on your part, you will soon have a credit score that you can be proud of, and we will show you how to start to improve credit and improve your ratings.
Open a bank account
Opening a bank account should be your first step upon your arrival to the United States. You can try both a local bank or some of the national ones, such as Chase or Bank of America among many others. Though this will not help to improve your credit score on its own, you will need somewhere to store your money during your life in the US. It can also be helpful to begin forming a relationship with a financial institution, should you need anything from them in the future such as a mortgage, credit card, or personal loan. As some banks will make it easier for an immigrant to get a credit card if they are already a customer.
Authorized Users
If you know someone who has very strong and high credit scores right now, see if you can get added as an authorized user to their account. It will almost immediately boost your score (I have witnessed this myself and saw scores increase by dozens if not hundred(s) of points), and the technique works for immigrants as well. There is also no cost for the person with the strong credit score either, as it is free to do and it will barely (if have any) impact on their ratings.
The process is free to do, although there are some third party websites that charge those in need hundreds or even thousands of dollars for this service. I recommend staying away from them as the benefits from an improved credit score are fleeting using those providers. There may also be may scams from those websites that try to trick immigrants as well as other users.
Immigrants can get a secured credit card
Soon after you open your bank account, you should next apply for a secured credit card. These will be much easier to get that a “standard” card, as that may not be an option for an immigrant. If you search around you may find free offers as well.
With a secured credit card, you will need to put a sum of money down as a security deposit or collateral with the financial institution. This amount will then become your credit limit. It reduces the risk to the lender and helps the lender build comfort with you.
For example, if you put down $500, this amount will then become the credit limit on your card. You will not be able to spend more than that amount on the card. After around 6-12 months of successfully paying off your card every month, you will have begun to develop a credit score and history. At that point, you will be given your initial deposit back and your card will become a regular credit card. Another option is also applying for a credit card if you do not have a social security number.
Talk to a free credit counselor
Immigrants can talk to credit counselors from a non-profit. There are national organizations for phone consultations or online chats, and most cities also have local branches of non-profit credit counseling organizations. Generally low income families can get free advice.
The credit counseling service will provide the immigrant with everything from budgeting tips to information on paying off debts, applying for personal loans, employment and more. The goal is to help build financial literacy of the client (immigrant), as most people sorely lack this skill. Find a local non-profit credit counseling agency.
Alternative credit building ideas for immigrants
Once you have proven that you can responsibly manage your credit with the secured card, you will find your score growing pretty quickly. But of course there will be other factors that come into play. However, there are a few other ideas that you can explore to boost your score more quickly if you wish. These suggestions include:
• Taking out a small loan. As the money is repaid the immigrants credit will improve. Also try credit builder loans for starting credit history.
• Asking your landlord to report your rental payments.
• Look into one of the many financial assistance programs for immigrants, which we have listed on our site.
Once you have gotten the ball rolling on your credit journey by completing these steps, all that's left to do is wait. It does take some time, and nothing happens overnight. The longer you prove that you can responsibly manage your credit, the higher your score will go. Once you are well established, you will be able to make those major purchases and rentals with relative ease.
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