What Is A Thin Credit File And How Can It Affect Me As A Non-Citizen?
The good news is that thin credit is not the same as bad credit. We’ll explain what thin credit is and how it affects non-citizens.
Most new immigrants to America will have what is called a “thin credit file.” The good news is that having a thin credit file is better than having bad credit! We’ll explain what a thin file is and why it’s bad, and what can a person with a thin credit file do to establish credit.
What does a thin credit file mean?
A credit file is what makes up your credit report and contains things including:
Number of accounts
Types of accounts
Account balances
Payment history
Negative marks
The information in your report tells potential creditors how well you’ve managed the credit you’ve had in the past. If they loan you money, are you likely to pay it back? You may have a long credit history in your home country, but unfortunately, that information doesn’t carry over to the U.S.
This lack of credit history is termed a thin credit file. In contrast, bad credit means information in your credit report shows you’ve poorly handled past or current credit accounts.
Thin credit files and citizenship
Under the Biden administration, the U.S. Citizenship and Immigration Services does not factor in credit reports or credit scores when considering Green Card applications, but that could change under a different administration. And thin credit or poor credit can mean the Green Card approval process will take longer.
How to improve a thin credit file
It’s faster and easier to improve a thin credit file than improve bad credit, although it is absolutely possible to improve bad credit. Each time you open a new credit account, you are “fattening up” your credit file! Using that credit responsibly, i.e., making your payments on time and paying the full balances each month, is how you increase your credit score.
Loans for thin credit files are one option. For those with thin files, a credit builder loan will be easier to be approved for than a traditional personal loan. A credit builder loan is a small loan, usually less than $1,000. You don’t receive the money at the beginning of the loan. Rather the money is held in a secured savings account.
Each month you make a payment towards the loan. The bank will report your payments to one or more credit bureaus. Each payment helps build your credit file, and as long as the payments are on time, it helps grow your credit score.
When you’ve paid off the loan balance, the money is released to you. SeedFi offers credit builder loans, and payments are reported to all three credit bureaus.
Credit cards are another excellent option for beefing up a thin credit file. Because a thin file can make being approved for a traditional card tough, the best credit cards for thin files are secured credit cards. A secured credit card requires a deposit. Typically, that amount is your credit limit. You make monthly payments, but the issuer has the deposit if you don't, so there is no risk for them.
The payments are reported to one or more credit bureaus, and often, if you make a certain number of on-time payments, you can transition to a traditional credit card. Sable Card is a secured credit card. Sable doesn’t charge any fees, doesn’t require a credit check, and can upgrade you to a regular credit card in as few as four months.
Start Building Today
At Upwardli, we understand how important credit is to life in America and how many barriers there are for new immigrants to navigate the American personal finance system. That’s why we have partnered with financial services providers who specialize in working with new arrivals and whom you can trust.
