How to build credit if you’re new to the US
If you’ve just emigrated, these tips will help get you started building your credit
Use these tips to start working on a great credit score if you're a new immigrant to the US.
For many people, it’s a dream to relocate to the U.S. For many others, the opportunity just presents itself. Whichever the case may be, your dream could quickly turn into a nightmare if you’re in the dark on how to build your credit as a newcomer to the U.S., where cash is no longer king and credit scores can prove a strong determining factor for quality of life.
This post breaks down exactly how immigrants who have just gotten to the U.S. can build their credit.
1. Get your Social Security number
The first step toward building your credit as a fresh immigrant is to get a Social Security number. This is a specific series of digits assigned to citizens and immigrants who are authorized to work in the U.S.
Once you obtain your SSN, keeping it close and safe is essential because it will serve as one of your prime means of identification in many situations. For example, whenever you apply for a credit product, potential lenders require your SSN in order to conduct a background check. If someone else has access to your SSN, you could end up paying the price for their misdeeds when they impersonate you for their own gain. Get your number; keep it safe.
2. Obtain a secured credit card
A secured credit card requires you to provide a cash deposit equal to the card limit. The deposit “secures” the credit card in the event that you default on the necessary payments.
As you make your card payments, the financial institution reports your activities to the credit bureaus, helping you build your credit gradually. When your credit health is strong enough for you to upgrade to a regular credit card and you close the account, you will receive a refund of your original deposit.
Secured credit cards are also a great option for anyone who just got out of prison and is looking to rebuild credit.
3. Take out a credit-builder loan
A credit-builder loan is another way to build your credit as a newcomer to the U.S. This type of loan involves the amount you’re borrowing being held in a secured account while you gradually make the necessary payments.
Upon completion of the payments, the institution will release your money to you and report your gradual servicing of the loan to the credit bureaus. This reflects positively in your credit report and builds your credit score.
4. Become an authorized user
We all need somebody to lean on sometimes.
Another way to build your credit if you’re new to the U.S. is to become an authorized user on a relative’s or trusted friend’s account. Even as you spend from their account, only the account owner is liable for the payments.
As long as you don’t abuse their trust and pay them back every dollar you spend, you can reap immense benefits in terms of building your credit if you and the account owner both behave in financially responsible ways. How? The account owner’s activities count equally as yours and also show up on your credit report.
5. Open a bank account
You’ll need to open a savings or checking account with at least one bank. This makes it possible for you to get loans and credit cards as you progress on your financial journey. Also, a bank account will enable you to set up automatic payments for the timely payment of recurring debts. This will improve your credit health even more.
6. If possible, transfer your credit data to the U.S.
You may be able to transfer your credit data from your former country of residence to the U.S. If your credit is in good health, it’s an excellent beginning for you.
Nova Credit helps transfer and convert your foreign credit data into its U.S. equivalent; this service is available to immigrants from a number of countries.
7. Be responsible with your finances
Credit-building in the U.S. involves meticulous planning and diligence. Here are some steps you can take to ensure that you don’t slack:
- Monitor your credit report and credit score.
- Pay your bills on time.
- Maintain a healthy credit mix.
- Keep your credit utilization ratio as low as possible.
- Watch out for credit reporting errors.
- Generally, avoid behaviors that will decrease your credit score.
If you follow these seven steps, you should be well on your way to building a robust and respectable credit score even as a newcomer to the U.S. If you run into difficulties like discovering credit reporting errors, contact us. We’ll be happy to help out.