I’m a New Immigrant With No Credit History - What Do I Do?
New immigrants face the challenge of building up a U.S. credit history from scratch. As a new immigrant with no credit history you might be asking ‘what do I do?” U.S. Citizens often take their credit scores for granted, but not having one can make it near impossible to complete financial tasks like qualifying for a mortgage or car loan.
It’s best to establish credit as soon as possible because it can take time for your first credit report to be generated. Luckily, there are concrete steps you can take as a new immigrant to establish a credit file.
How Does Credit Work in the United States?
Even if you immigrate with great financial credit from your home country, you’ll mostly need to start fresh in the United States.
Your credit is built when credit card companies, banks, and other institutions you do business with report your payment history to one of the 3 main credit bureaus in the United States. From there, your credit report becomes a record of how you manage your debts. Based on the information inside, a 3 digit credit score is then calculated.
How to Build Credit as a New Immigrant
See If Your Home Bank Operates in the U.S.
You may already have an account with an international bank that operates in the United States. In this case, they may be able to set you up with a Credit Card recommended for clients moving to the U.S. The specifics will vary from bank to bank, so we suggest reaching out to customer service to check your options.
Open a Secured Card
When used correctly, a credit card is one of the most efficient ways to build or improve your credit. As a new immigrant with no credit history, you will probably have to opt for a secured card to start out. The Sable card is a great option.
A secured card requires you to keep a deposit in your account that acts as the spending limit for your card. More specifically, the amount you spend can’t exceed your deposit. This form of secured credit is revolving meaning your credit line will replenish as you pay your bills.
Become an Authorized User
If you have close friends or family members that already have good U.S. credit scores, getting added to a credit card account of theirs is a fabulous way to build your own.
An authorized user on a credit card can make purchases and the account will subsequently show up on your own credit report. It’s important to make sure that you trust the person whose account you want to become an authorized user on. If they miss payments, it will reflect poorly on your credit as well.
Find a Cosigner
As a new immigrant, it’s often tough to apply for a credit card or loan until you have enough time to gradually build your credit. One way to up your chances for credit approval is to get a cosigner. A cosigner is someone who is responsible for paying off any unpaid debts in the event that you do not.
Adding a cosigner is a decision that should not be taken lightly. Any missed payments will reflect on their credit history the same as it does yours.
Practice Good Credit Habits
Once you start generating a credit history and opening credit accounts, you need to make sure you are practicing positive credit habits. Some of the most common credit tips include always making payments on time, keeping credit utilization low, only applying for credit when needed, and making sure to actively monitor your credit report.
How Long Does it Take to Build a Credit History?
As a general rule of thumb, it usually takes around six months of credit usage to generate your first credit score. On the other hand, building up to a good or excellent credit score can take much longer. That’s why it’s important to start establishing a credit history as soon as possible.
It won’t happen overnight, but following the tips mentioned above can help you start out on your journey to good credit in the United States.
