How to build credit in the U.S. as a new immigrant
Moving to a different country comes with new experiences. For many recent arrivals in the U.S., establishing credit is one of them.
Credit affects so many aspects of life, including buying a home or a car and renting an apartment. Find out some ways you may be able to build credit in the U.S. as a new immigrant.
What you’ll learn:
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Applying for a Social Security number (SSN), opening a bank account and applying for a credit card are possible first steps toward building credit in the U.S.
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Other potential ways to establish credit include becoming an authorized user and taking out a credit-builder loan.
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Practicing good financial habits like paying bills on time and applying only for the credit you need may help you build good credit scores.
How can immigrants build credit?
Building credit can be part of setting yourself up for financial success. But it takes time, effort and responsible use. Here are five steps that might help you establish and build credit as a U.S. immigrant.
1. Apply for an SSN or ITIN
Credit card issuers and banks often ask for your SSN to verify your identity before approving you for a bank account, credit card or loan. Depending on your immigration status, you might be eligible to apply for an SSN.
An alternative is an Individual Taxpayer Identification Number (ITIN) issued by the Internal Revenue Service. An ITIN is available to certain nonresident and resident foreign nationals, their spouses and their dependents if they don’t qualify for an SSN. Policies for accepting ITINs differ. And some credit card issuers may accept ITINs only for some of their cards.
2. Open a bank account
Checking and savings accounts generally won’t impact your credit. But having a bank account can be a helpful way to establish a relationship with a financial institution. And you may not need an SSN to open an account.
3. Apply for a secured credit card
When used responsibly, a credit card can be a good tool for building credit. Secured credit cards are designed for people who are newer to credit. This type of credit card requires a one-time, refundable security deposit to open an account. Other than the deposit, secured cards work the same as traditional cards. You can use a secured credit card to shop in person and online exactly as you would with an unsecured credit card.
Sometimes, secured card credit limits are the same amount as the security deposit. So a $200 deposit might translate into a $200 credit limit. But that’s not always the case. With the Capital One Platinum Secured card, an initial security deposit of $49, $99 or $200 can open an account with a credit line of at least $200. Platinum Secured also lets cardholders raise their credit limit by depositing more than the minimum.
Secured cards like the Capital One Quicksilver Secured card even offer rewards.
There are also unsecured cards for people with fair or average credit scores, like the Capital One Platinum card. It has a $0 annual fee, and in as little as six months, you’ll automatically be considered for a credit limit increase. View important rates and disclosures.
4. Use credit responsibly
Once you’ve opened a credit card account, it’s important to practice good financial habits. Here are some steps you can take to use credit responsibly to help build your credit and improve your credit scores.
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Make payments on time. Payment history represents a large part of your credit scores. Making on-time payments can help build good credit. But late credit card payments can hurt your scores. They can also lead to late fees and higher interest rates. Setting up automatic payments or electronic reminders could help you avoid late payments.
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Keep your credit utilization low. Staying below your credit limit can benefit your credit utilization ratio, which represents how much of your available credit you’re using. The Consumer Financial Protection Bureau (CFPB) recommends keeping your credit utilization ratio below 30%.
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Be careful with applications. Applying for a new credit account usually triggers a hard inquiry on your credit. Multiple hard inquiries at once may affect your scores. The CFPB recommends only applying for the credit you need.
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Monitor your credit. As you work to start building credit in the U.S., you can track your progress and watch for potential issues. CreditWise from Capital One is one way to monitor your credit report and score for free—even if you don’t have a Capital One credit card. And using it won’t hurt your credit scores. You can also get free copies of your credit reports from each of the three major credit bureaus at AnnualCreditReport.com.
5. Pay rent and utilities on time
A solid history of on-time payments for expenses like rent, cellphone and internet service, and electricity bills could also help you build credit. But this is only possible if your payments are reported to a credit bureau like Equifax®, Experian® or TransUnion®.
You may be able to use a third-party reporting service to report these payments to the credit bureaus. But before you do, make sure you’re aware of any fees and other terms and conditions.
Falling behind on these payments can lower your credit score even if your bills aren’t being reported regularly. Depending on how far behind payments get, the accounts could be turned over to a collection agency. And the debt collector could make a negative report to the credit bureaus.
Can immigrants build credit without getting a credit card?
If you’re not ready for a credit card or haven’t been approved for one, you may still have other options for building credit.
Become an authorized user
An authorized user is someone who’s added to an existing credit card account. The account holder is responsible for the bills. And if everyone on the account uses it responsibly, it could help improve both your credit. But negative actions could have the opposite effect.
The Federal Trade Commission (FTC) warns of a related scam called tradeline renting or credit piggybacking. This is where companies sign you up as an authorized user on a stranger’s credit in exchange for a fee. The FTC says such practices can be illegal and can’t guarantee any benefit to your credit scores.
Take out a credit-builder loan
With a credit-builder loan, you’re required to pay off the amount owed before you’re allowed access to the money. Getting approved for a loan but not having immediate access to your funds may seem strange. But one benefit of this type of loan is that you’re building a payment history when lenders report that information to the credit bureaus. And if you pay on time, you could see a positive impact on your credit scores.
Building credit as a new immigrant FAQ
Here are the answers to some frequently asked questions about building credit as a newcomer to the U.S.
Do new immigrants have credit scores?
No, immigrants don’t have credit scores when they first move to the U.S. Credit history and scores from a foreign country don’t transfer over. While other countries have credit scores, their credit-scoring systems aren’t typically compatible with those in the U.S. Immigrants may need to create a credit file with at least one of the three major American credit bureaus to start building credit history.
How long does it take to build credit in the U.S.?
Building credit takes time. And there’s no magic formula for how long it takes. Credit scores and reports are based on your history with credit.
Credit-scoring company FICO® says for it to be able to calculate a credit score, you need:
- At least one account open for six months or more.
- At least one account that’s been reported to the credit bureaus for six months.
Can you build credit with an ITIN?
Yes, some credit card issuers let you use an ITIN instead of an SSN when applying for a credit card. But your ability to build credit is based on using the card responsibly, not on the method you used to apply.
Can a non-U.S. citizen get a credit score?
Yes, foreign nationals and immigrants can start building credit without becoming U.S. citizens. Citizenship can be a long process that may start with at least five years as a lawful permanent resident. But immigrants may be able to start the credit-building process once they have an ITIN, photo ID and proof of address along with a bank or credit union initial deposit.
Key takeaways: Building credit for new immigrants
Credit cards can be helpful tools for building credit in the U.S. But that’s only possible if you’re using credit responsibly by doing things like paying statements on time every month. You can see if you’ll be approved for a Capital One credit card with 100% certainty—without any harm to your credit scores.
