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Relocating to any new country presents a slew of challenges. A potentially unexpected one for immigrants to the United States is the need to to build a credit score from scratch. New immigrants are "credit invisible" without a U.S.-based credit report, which can make it nearly impossible to get approved for loans and other forms of credit. Lack of a credit history can also make it harder to rent property and to obtain cellphone and utility services.
Even if you have sparkling credit scores from another country, they typically won't count in the United States—though some new services aim to help with this (more on that later). Once your credit file is created with at least one of the three major U.S. credit bureaus, it can take up to six months of payment history or more before a credit score can be calculated, although some newer credit scoring systems may need as little as one month of history. If you've recently immigrated to the U.S. or plan to soon, follow these five steps to start building your credit history.
1. Apply for a Credit Card
Getting a credit card is one of the best ways to establish and build your credit history.
First, you should find out if the bank you used in your previous country operates in the U.S. Some banks, such as Citibank and Barclays, operate internationally and may be willing to open an account for you at a U.S. branch. They may even be willing to issue you a credit card. If your bank doesn't do business in the U.S., there are other options you can explore.
If you have zero credit history in the U.S., you may not qualify for a traditional credit card right off the bat. However, it could be worth a try to look for cards geared toward those with little credit history, such as the Milestone® Mastercard®. They don't offer much in the way of rewards, and their interest rates can be steep, but these cards can help you start building credit right away.
Another option is to apply for a secured credit card like the Capital One Platinum Secured Credit Card. Secured cards require an upfront cash deposit and typically have low credit limits, though they're easier to qualify for with limited credit history. Using your secured card responsibly can help you build your credit enough that you're able to qualify for an unsecured card eventually. Just make sure the secured credit card issuer reports activity to the credit bureaus, since this is critical to establishing payment history.
2. Consider Alternatives
Another option is to take out a credit-builder loan. These don't function like traditional loans; they exist to help people establish credit, and have the added benefit of building up your savings in the meantime. Credit-builder loans are available at some credit unions and community banks. Before applying for a credit-builder loan, make sure the financial institution that manages it reports your payments to the credit bureaus.
There are also some newer services geared toward immigrants who lack a U.S. credit history, and can help you get your credit report from other countries in a form that U.S. lenders can use. This makes it possible for some immigrants to get approved for credit in the U.S. faster.
There are also some inventive new lenders like Stilt, which specialize in extending loans to U.S. immigrants. Rather than looking at a credit score, they review other aspects of your finances. Once approved, the loan is reported to Experian and TransUnion, which can help users build credit. WebBank uses a similar process to consider factors beyond credit when evaluating applicants for the Petal® 1 "No Annual Fee" Visa® Credit Card.
3. Become an Authorized User
If your spouse or another loved one already has a credit card in the U.S., you could ask to become an authorized user on their account. As an authorized user, you'll be able to make purchases using their account, but the primary cardholder is ultimately responsible for the card's payments. The card's account information (including its payment history) can then be added to your credit report.
Not all credit card issuers report authorized-user accounts to the credit bureaus, however, so find out if their lender does so before you're added to the account. If your account is reported, the card's activity can help build your credit history. Just ensure you trust the primary cardholder to use the card responsibly, since high card balances can work against your goal of building credit.
4. Get Credit for Paying Rent and Other Bills
Rent payments aren't automatically reported to credit bureaus. However, some property management companies and rent payment services do report payments. These rental payments can then be factored into your credit score.
Ask your landlord or property management company if it reports your rental payments to a credit bureau. If not, you might want to look into third-party services that automate your rental payments and report your on-time bill payments to the credit bureaus.
Another helpful option is Experian Boost®ø, a free feature of your Experian account that gives you credit for bill payments that don't normally show up on your credit report. As you build a credit history, Boost can help you gain more ground by adding your payments for phone, utility and streaming service bills to your Experian credit report.
5. Responsibly Manage Your Credit Accounts
Once you've obtained a credit card or loan, managing it responsibly will push your credit in the right direction, making it easier to then qualify for future accounts. Here's how:
- Pay all bills on time. The timeliness of credit card and loan payments are reported regularly on your credit report, and payments that are late by 30 days or more can drag down your score. Payment history is an important factor in your credit score, so it's key to pay your bills on time, every time. Keep in mind that even if accounts don't normally show up on your credit report, they have the potential to damage your score if you fall behind on payments and the account is sent to collections.
- Keep credit card balances low. Your credit utilization ratio, which indicates how much of your available credit you're using at any given time, is an important factor in your credit score. Use no more than 30% of your balance at any given time to keep your score in good shape. Those with the best scores tend to keep their utilization rate in the single digits.
- Be careful about applying for new credit. Getting accounts in your name is important, but applying for and opening too many new accounts at once can work against your score. The age of accounts also factors into your credit score, so try to stick with the ones you have for a while; slow and steady wins the race.
Build Credit History Faster
Building credit as an immigrant in the United States can be a lengthy process that requires patience. Fortunately, an increasing number of services exist that make the process easier. As you work toward building your credit, you can check your credit report and credit score for free through Experian.