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Your credit score holds a lot of weight in the United States. Want a new car? House? Job? Need a loan? You need a good credit score. However, as someone who is new to this country, you probably have little to no credit history. Though it sounds contradictory, you have to get credit in order to build your credit and doing so as an immigrant is far from impossible. Read on to learn more about the process of building your credit when you’re a newcomer to the U.S.
What is Credit?
Depending on where you are from, the concepts of credit and credit scores may be completely foreign to you. The basic definition of credit is your ability to borrow money and repay it to a lender while your credit score shows the lender your ability to pay back loans on time. Your credit history and score are recorded in a credit report, or your history of credit experience that is reported to three national credit reporting agencies: Equifax, Experian and TransUnion.
Credit scores are split between two different systems: FICO, which stands for the Fair Isaac Corporation that developed the FICO® credit scoring models that many lenders use and VantageScores, which is a score developed jointly by Equifax, Experian, and TransUnion. FICO’s credit scores come in various ranges, but in general, a good score usually falls between 670 and 739 points. VantageScores has a similar range for what is considered a good score, falling between 661 and 780 points.
While building your credit, avoid falling into some common traps that could hurt your credit score in the end. Depending on the source you are borrowing from, interest rates, or the percentage of the money loaned that is charged by the lender and other fees can really add up. Interest rates can differ depending on payment plans; for example, pay off a loan quickly and you won’t need to pay much interest. Some lenders will work with you to schedule payments on your loan with a specific interest rate in mind.
How Do I Check If I Have Credit?
Not sure if you have credit? One surefire way to find out is whether or not you took out student loans in order to pay for college in the U.S. before becoming a citizen. If you did, you may have a credit history built on your student loan payments. Also, if you have ever had any U.S. credit card, you should have credit.
Still not sure? There are multiple ways for you to check your credit status. One reliable method is to request a free credit report from the Annual Credit Report, a website run by all three major credit bureaus: Equifax, Experian, and TransUnion . You can also check your credit score at any time on websites like Experian and Credit Karma. Please do not believe the myths; checking your credit score frequently does NOT affect it!
I Have No Credit. Where Do I Start?
If you don’t have any pre-existing credit in the U.S., don’t worry! There are ways to build your credit from scratch. The easiest way? Credit cards.
In order to apply for a credit card, you may have to meet specific requirements, such as a certain credit score; however, there are other ways to get a credit card. Depending on your home country, you may be able to apply for an American Express card, which is based on your international credit history. Choose from a selection of cards that easily fit your needs while paying attention to yearly fees and interest rates.
But what if you don’t have an international credit history to rely on? In that case, a secured credit card is your best bet. With a secured credit card, you pay a collateral fee from which you can withdraw money. Though you are withdrawing money from yourself, this helps to build your credit in the process.
Similarly, you could apply for a credit-builder loan. The loan is deposited into a savings account and you make payments until eventually the money in the account is yours, helping to build your credit.
A few more quick tips:
- Register for a Social Security Number or, if you are not eligible for an SSN, apply for an Individual Taxpayer Identification Number (ITIN). Applying to jobs and opening up a bank account require a Social Security Number, but some providers take an ITIN as well.
- Make payments on loans, your rent, cars, and credit cards on time.
- Don’t be afraid to ask for help. Asking a friend or family member to co-sign a loan with you can help you get a loan.
Building your credit from nothing might be scary, but it doesn’t have to be. Want to learn even more about credit? Check out our e-learning video, ‘What is Credit?’ where we interview our banking expert Ronnie Roizin on how to build and maintain good credit. Looking for a financial advisor or a bank in your local area? Buy a Resource Referrals package today so we can do the research for you and put you in touch with the service provider who fits your needs the best. Golden Beacon USA’s products and services are here to make your transition to your new country as easy as possible! Questions? Contact me today at firstname.lastname@example.org or call or text (866) 403-7173. Remember, you are not alone!