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How to Build Credit In the U.S.

Jan 17, 2020

This article was provided by Nova Credit, a company that helps immigrants use their international credit history in the United States.

Building a U.S. credit history is important for anyone who’s recently moved to the U.S. in order to ensure you can access the basics from a credit card to an apartment rental, car lease, loan, or mortgage. Without any credit or a credit history, you might be charged a high security deposit upfront for a rental or, even worse, be rejected.

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You need credit to build credit and navigating the complexities of credit reporting isn’t simple. Credit products typically come with interest fees or other costs. Lots of creditors, including credit card companies, might offer low introductory rates on products with rates that can then increase substantially after a few months.

1. Transfer your credit score to the U.S.

3D illustration of a conceptual gauge with needle pointing to excellent.

Although there are different ways to build credit, you might be able to transfer your existing credit from abroad to the U.S using Nova Credit. With your consent we locate, translate, and transfer your international credit data to our business partners to help you get the credit you’ve earned.

Nova Credit creates a global Credit Passport that helps people bring their credit history with them when they move to the U.S. While your credit history won’t be transferred to national bureau databases, Nova Credit partners with companies to include information from your Credit Passport in application processes to make it easier for newcomers to get approved for credit cards, loans and other products. Once you establish a U.S. credit account using the credit you’ve earned abroad, you can start building a local credit history. Nova Credit currently connects to international credit bureaus in Australia, Brazil, Canada, India, Mexico, Nigeria, South Korea and the UK.

2. Apply for a secured credit card

Person holding a credit card.

One way to get started with building U.S. credit is by using a credit card to prove your creditworthiness. If you cannot transfer your global credit through Nova Credit, consider applying for a secured credit card to help build your American credit score. These cards require you to put down a cash deposit at your bank account or credit union. Your spending limit is generally the amount that you have deposited.

Important: Make sure that the issuers of your secured card report your payment history to at least one of the three major US credit bureaus, Equifax, Experian or TransUnion. If they don’t disclose this information on their websites, you can reach out to their customer support team for clarification. Unless your payment history is reported, the secured card won’t help you build a U.S. credit score.

Although lenders often request a Social Security Number (SSN), they will also accept an Individual Taxpayer Identification Number (ITIN) as well. Some banks may accept passport, a state-issued photo I.D, or a driver’s license for identification, although you typically have to do this in person. Look out for banks or credit unions that can accept multiple forms of documentation for immigrants. Stopping by a local bank branch and explaining your situation can sometimes be more effective than applying online because bank agents can often easily check whether or not hey can pre-approve you for a card in person.

3. Establish a relationship with a bank through a savings or checking account

A couple meet with a banker.

Opening a checking or savings account with a bank may help you get a credit card or loan with that financial institution down the road. As you build a relationship with the bank early on, you start signaling financial stability.

Before selecting a bank or credit union, consider your priorities. Does it have accessible ATMs? Does it have good customer service? What about monthly or annual fees? Important: After you open a checking account, you should be careful to not overdraw as this will negatively impact your US credit report.

4. Apply for U.S. credit with a co-signer

A person co-signs for a credit card.

One other way to make it easier to get a new credit product is to apply with a co-signer who already has an established credit in the US. When you list someone with an established U.S. credit footprint as part of your credit application, you can benefit from their good credit history. Before applying, however, make sure your co-signer knows what he or she is getting into — a co-signer agrees to be responsible for your debt if you don’t pay your bills. Research co-signer options when you apply for different credit cards or loans.

5. Pay on time, monitor and change products, and be patient

A couple pay their bills.

You’ll officially begin building credit as soon as you have a credit product (credit card, student loan, mortgage, etc.) that is being reported to the major U.S. credit bureaus. Pay your bills on time to demonstrate your creditworthiness and build a good credit history. If you have a credit card, aim to generally use it at least once a month to demonstrate that you know how to use credit responsibly over time. Another important factor in your credit score is your credit card utilization: a good rule of thumb is to not use more than 10% of your limit. Be sure to also check your payment due date so you don’t miss a bill. Many providers will let you set up an automatic recurring payment from your checking account to ensure that you don’t fall behind.

You are now logged in the U.S. credit system after a few months of on-time payments, which will make it easier for you to get approved for another credit product. This could mean that after a few months of making on-time payments on your secured card, you will become eligible for a credit card that doesn’t require a security deposit. Check your credit score regularly and look at credit card offers with a higher credit limit, as these result in improved credit scores as well. To help monitor your credit and explore other products, you can use the free credit score and monitoring tools from Credit Karma or NerdWallet (among others).

Keep in mind that it can take multiple years to get back to the credit score that you had in your home country. It takes patience and close monitoring to build credit in the U.S.

The takeaway

You may be able to apply for credit products in the U.S. via Nova Credit using your international credit report if you have a credit history abroad, If you can’t use our service, you should explore various methods of building credit from scratch from applying for a secured card to finding a co-signer or establishing a relationship with a bank. Invest time in smart credit and savings products and be diligent in monitoring your score. Good luck on your journey!

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