To begin to build credit in the US as a novice might seem overwhelming. But it’s a good way to be financially stable, get approved for a loan, live on your own, etc. This is our U.S.. credit building guide to teach you everything you need to know about building credit in the U.S. — from getting your US credit score to getting your first bank account, debit card, and credit card.
What Is a U.S. Credit Score?
A credit score in the US is a value between 300 and 850 which indicates to lenders whether you are going to pay back money you have borrowed. The greater the number, the more desirable your credit score is to any potential lender (whether it’s a bank, a credit card company, or even a car rental company).
Here’s how credit scores are usually broken down:
- 580-669: Fair
- 670-739: Good
- 740-799: Very Good
- 800+: Excellent
Credit bureaus assign you a score in slightly different ways, but most will do it based on your history in the US, including any bank accounts, phone agreements, and loans you’ve taken out and paid off.
How Can I Get a U.S. Credit Score?
If you have a good credit score, you have a lot of doors to knock on in the US. Listed below are just some reasons your credit score is important:
- Getting a house or apartment: Most landlords take credit scores on their tenant application.
- Contracts for phone service: If you have a bad credit history, you may be required to make a large security deposit.
- Loan approval or credit card approval: You’re going to get approved much easier with a good credit score and possibly higher credit limits.
- Cheaper insurance: Car and Home insurance premiums are cheaper with a higher credit score.
Did I Already Have A U.S. Credit Score?
You probably have no credit in the U.S. If you’ve only recently landed in the US, you probably haven’t had one yet. Even if this will put lenders off evaluating you for reliability, remember that no credit doesn’t equal bad credit. Once you get started building a history in America, you can get good credit.
You can do a credit score check by contacting one of the three major credit bureaus — Experian, Equifax, or TransUnion — or you can use an online third-party check provider. Note that, if you are foreign and don’t have any credit history in the U.S., it could take up to three months for your score to be established.
How Do I Acquire Credit In The U.S.?
Your credit score is determined by how you conduct your money, so the quickest way to get credit started is to keep an accounting account. You do this by opening a bank account, getting a debit card, or applying for a credit card. Here’s how you can start:
Set up a bank account:
This is one of the quickest ways to get started with your credit history in the U.S. You can get a basic account with a debit card at almost any bank. It is the account you use for your everyday business like bill paying and getting paid.
Get a credit card:
Once you’ve opened a bank account, try applying for a credit card. Responsible credit card usage is the fastest and best way to increase your credit score. Just make sure to pay your balance in full as well so that you won’t incur late fees and get your score. This payment is a security in case you don’t pay. What you can charge to the card is usually a deposit of either $200-$2000.
How does it work?
- Your deposit (which becomes your credit line).
- You pay for the card like you’d use a credit card.
- You will see your credit score starting to climb if you are regular on your payments.
- If you’re a good user for a few months, you may be able to move up to an unsecured card without a deposit.
Top Tip for Credit Building
Choose a deposit amount you are comfortable with when you apply for a secured credit card. You can bet on a lower deposit limit since you are still new and want to make sure that you will regularly pay it back.
Sable Card for New Users
For someone looking to get a bank account in minutes and begin earning credit, Law and Visas suggest Sable Cards. This card has a 5-minute application process online that doesn’t require an SSN, ITIN, or credit. With Sable you get a bank account and a secured credit card, plus cashback, free car rental insurance, etc.
Benefits of Sable Card:
- No charge on basic banking products (no account renewal fee, ATM fee, or overdraft fee).
- No exchange rates for foreign money.
- Cashback and rewards on purchases.
- If you choose a Sable Card, you can start your credit score-building process without the standard hurdles like having to have an SSN or having credit in the US.
Alternative Credit Cards for Newcomers Without U.S. Credit History
Navigating the U.S. credit system can be challenging for newcomers without a credit history or Social Security Number (SSN). Fortunately, several options exist for obtaining credit cards designed specifically for international visitors and those new to the country. This guide will explore alternative credit cards, how to leverage international credit history, methods to build credit without a card, and essential tips for managing your credit responsibly.
Discovering Credit Cards Without U.S. Credit History
For newcomers, securing a credit card without a local credit history is possible through various options:
- Secured Credit Cards: These require a refundable security deposit that acts as your credit limit. For example, if you deposit $500, your limit will typically be set at $500. This reduces the risk for the lender and helps you build a credit history through responsible use. Many banks offer secured cards, such as the Capital One Platinum Secured Card and OpenSky® Secured Visa® Credit Card.
- Student Credit Cards: Designed for college students, these cards often do not require a security deposit and can be easier to obtain. They typically have lower credit limits and may offer rewards for responsible use.
- International Credit History: Some financial institutions allow applicants to use their foreign credit history to qualify for U.S. credit cards. Companies like Nova Credit facilitate this process by converting international credit scores into a format acceptable to U.S. lenders.
Examples of Banks and Financial Institutions Offering Such Cards
Several banks and financial institutions cater to newcomers seeking credit options:
- Zolve: This platform offers financial products tailored to individuals without U.S. credit histories, including no SSN requirements.
- Capital One: Known for its secured and student card offerings, Capital One provides accessible options for those new to credit
- Chase: While not offering secured cards directly, Chase has starter cards suitable for individuals who are new to credit.
- Discover: Their secured card option allows users to build credit while enjoying cash-back rewards on purchases.
Using Your International Credit History in the U.S.
If you have an established credit history in another country, you may be able to leverage this when applying for U.S. credit:
- Check with Financial Institutions: Contact banks that offer international services or inquire about using foreign credit reports.
- Nova Credit: This service allows newcomers to apply for U.S. financial products using their international credit history, which can help streamline the application process 3.
How to Build Credit Without a Credit Card
Building credit without a traditional credit card is possible through various methods:
- Credit-Builder Loans: These small loans are designed specifically to help individuals establish or improve their credit scores. Payments are reported to the major credit bureaus.
- Rent Reporting Services: Some services allow you to report your rent payments to the major bureaus, helping establish a positive payment history.
- Utility and Phone Payments: While these payments typically do not impact your score directly, some services allow you to report them as part of your payment history.
Understanding Credit Limits and Responsible Use
When starting out with a new credit card, understanding how to manage your credit limit is crucial:
- Setting Your Limit: Initially, your limit will be determined by your security deposit (for secured cards) or by the issuer’s assessment of your financial situation.
- Managing Utilization Rate: Aim to keep your utilization rate below 30%. This means if your limit is $500, try not to carry a balance higher than $150 at any time.
How to Establish a U.S. Bank Account
Opening a U.S. bank account is an essential step in building your financial profile:
- Choose the Right Bank: Research banks that offer accounts with low fees and good customer service.
- Gather Required Documents:
- Valid identification (passport or government-issued ID)
- Proof of address (utility bill or lease agreement)
- Immigration documents (visa or I-20 form)
- Visit the Bank: Go in person or apply online if available; some banks may require an in-person visit for identity verification.
- Open Checking and Savings Accounts: Having both accounts can help manage daily expenses while saving money.
Tips for a Successful Start
To ensure a smooth transition into the U.S. credit system:
- Research Options Thoroughly: Understand the terms of any card or account before applying.
- Monitor Your Credit Score: Use free resources available online to track your progress as you build your score.
- Make Payments on Time: Consistently paying bills on time is one of the most significant factors in building good credit.
Credit Scores and How to Monitor Them
Understanding credit scores is essential for anyone looking to navigate the financial landscape in the U.S. A credit score is a three-digit number that reflects your creditworthiness, influencing your ability to secure loans, credit cards, and favorable interest rates. This guide will cover the basics of credit scores, how to monitor them, best practices for building a strong credit history, and tips for newcomers.
Introduction to U.S. Credit Scores and Major Credit Bureaus
In the United States, three major credit bureaus—Equifax, TransUnion, and Experian—collect and maintain consumer credit information. Each bureau generates its version of your credit score based on the data it collects. While scores can range from 300 to 850, higher scores indicate better creditworthiness. Generally, scores are categorized as follows:
- Excellent: 720-850
- Good: 690-719
- Fair: 630-689
- Poor: 300-629
Credit scores are influenced by several factors, including payment history (35%), amounts owed (30%), length of credit history (15%), types of credit (10%), and new credit inquiries (10) .
How to Check Your Credit Score for Free
You can monitor your credit score without incurring costs through various methods:
- AnnualCreditReport.com: This site allows you to request a free annual report from each of the three major bureaus.
- Credit Monitoring Services: Many financial institutions and third-party services offer free access to your credit score as part of their services.
- Credit Card Companies: Some card issuers provide free access to your FICO score as a perk for their customers.
If you discover that your score is low, consider taking the following actions:
- Review Your Credit Report: Check for errors or inaccuracies that could be negatively impacting your score.
- Make Timely Payments: Ensure all bills are paid on time moving forward.
- Reduce Debt: Focus on paying down existing debts to improve your utilization ratio.
Using Your Credit Wisely to Build a Strong Credit History
To build a solid credit history, follow these best practices:
- Pay Off Balances in Full: Avoid interest charges by paying off your balance each month.
- Set Up Automatic Payments: Automating payments can help ensure you never miss a due date.
- Monitor Your Credit Utilization Rate: Aim to keep this rate below 30% of your total available credit.
As you establish a positive payment history, consider requesting an increase in your credit limit. This can help improve your utilization ratio while providing more financial flexibility.
Applying for Loans or Credit as a Newcomer
Once you have established some credit history, applying for small loans becomes feasible:
- Personal Loans: These unsecured loans can be used for various purposes and typically require a good credit score for favorable terms.
- Auto Loans: Having a decent credit score can help you secure financing for a vehicle at better interest rates.
Your credit score significantly affects loan approval and interest rates; higher scores generally lead to lower rates and better terms.
The Role of Co-Signers in Building Credit
Having a co-signer—someone with an established credit history—can facilitate securing loans or credit cards:
- Benefits: A co-signer can enhance your chances of approval and may lead to better terms due to their strong credit profile.
- Risks and Responsibilities: Both you and your co-signer are responsible for repaying the loan. If payments are missed, it will negatively impact both parties’ credit scores.
Using Rent and Utility Payments to Boost Your Credit
Rent and utility payments can be reported to the major credit bureaus to help build your credit history:
- Rent Reporting Services: Platforms like RentTrack or Cozy allow tenants to report their monthly rent payments, which can then be included in their credit reports.
- Utility Payment Reporting: Some services enable you to report utility payments as well, helping establish a positive payment history.
By utilizing these services, you can enhance your credit profile without needing traditional credit accounts.
How to Avoid Identity Theft and Fraud While Building Credit
As you work on building your credit, protecting yourself from identity theft is crucial:
- Use Strong Passwords: Ensure that all online accounts related to banking or finances use strong, unique passwords.
- Monitor Your Accounts Regularly: Frequently check bank statements and account activity for any suspicious transactions.
- Utilize Credit Monitoring Services: Many services alert you to changes in your credit report or suspicious activity.
- Place Fraud Alerts or Freezes: If you suspect identity theft, consider placing a fraud alert or freeze on your accounts through one of the major bureaus.
By taking proactive steps to monitor your financial information and protect against fraud, you can build a strong foundation for your financial future while minimizing risks associated with identity theft.
Building credit is overwhelming for a first-time visitor to the United States, but it’s an essential part of financial freedom. If you do what I’ve just explained — set up a bank account, make smart choices with a debit/credit card, and pay on time — you’ll be well on your way to establishing a good credit history and earning a decent amount of money here in the U.S. Whether you apply for a secured credit card or open an account with a bank that has lax rules for first-time users, just get started early and stick with it.
How Law and Visas Can Help?
At Law and Visas, our team of expert immigration consultants is here to make your travel to the U.S. straightforward and successful. Whether you’re applying for an H-1B Visa or a Visit Visa, we handle every step—from preparing your application to gathering the required documents.
Our Immigration Consultants and Lawyers ensure that your application meets the highest standards, with no details missed. We’ll also keep you informed throughout the process and coordinate with the immigration office or embassy on your behalf.
Law and Visas has a strong record of helping clients secure the visas/permits they need to visit the United States. You can call us today at +234 812 5505 986 to learn how we can help you.
