How to Build Credit and get US Credit Card for New Immigrants & International Students
Many new immigrants and international students find it difficult to start their new life in the US with their credit score or credit history from their home country suddenly invisible in the land of opportunity, America, which they proudly call home now. Therefore, building a good US credit profile is an important component of your financial life in the US.
If you’re a new immigrant or an international student who recently moved to the United States for work, study, or family reasons, you will need a way to build credit history in the US, to access financial products and services. One of the easiest and most convenient ways to build your credit history in the United States is to apply for a credit card.
But with no US credit history, how does one get approved for a credit card? This blog article will offer guidance on applying for a US credit card with no US credit history, in addition to other ways to build credit. We will also outline various options for a credit card for new immigrants and international students and best practices to build a US credit history and maintain a healthy credit score in the United States.
How does the credit score work in the US?
The credit score system in the US operates on a system of point values. All credit card applicants are scored according to their credit history, and credit scores match what the lender is looking for. The higher your creditworthiness, the more points you are awarded, and the lower your risk of financial default are assessed.
To maintain a healthy credit score, it’s important to use your credit cards responsibly by paying bills on time, keep balances low, and not apply for too many credit cards at once. Households with multiple borrowers or partners should be aware that your credit card issuer may also assess all partners on one overall composite irrespective of who holds the card or pays the bill when applying for credit together.
Some people can have a credit history in their home country, but that doesn’t mean they’ll access it when living abroad. In addition, the U.S., like many other countries around the world, has its own system for calculating and tracking your financial health – one which may not include foreign information or metrics such as those used where you’re from before coming here!
There are three major credit bureaus or credit reporting agencies in the US – Experian, Equifax, and TransUnion. Each credit bureau collects information from creditors (banks, mortgage companies, etc.) about your borrowing history – how much you owe on what types of accounts (e.g., credit cards, auto loans, mortgages, etc.), whether you’ve been making payments on time every month to these lenders according to their terms, and whether your account has been closed or reduced in credit limit.
The US credit score is also known as the FICO score and is the most commonly used credit scoring model, created by Fair Isaac Corporation. It’s calculated based on five main factors: payment history (35%), amounts owed as a percentage of total debt (30%), length of credit history (15%), new credit as a percentage of total available credit on your report (10%), and types of inquiries for more than one account or credit mix (10%).
An inquiry means that someone has requested an application or other form of information about you from a creditor – this can include checking to see what type of loan or credit card you might qualify for or investigating your existing financial history.
What is the credit score range in the US?
The credit score range in the US is 300 to 850.
To be considered someone with excellent credit, your FICO score should be 760+. Anything over 700 is generally considered a good credit score. In contrast, a FICO score under 600 puts you at high risk for defaulting on your debt repayment, and it might be difficult to obtain credit products with a low credit score, or creditors may charge higher interest rates to lend to you than other customers.
Newcomers to the United States should gradually build up their credit scores. Getting a credit card for new immigrants and international students is the best and easiest way to get started.
How New Immigrants and International Students can get a US credit card?
Building credit is crucial to your move to the United States. Therefore, you probably want to get started on building credit as soon as possible. However, there are things you may need before starting the process, such as having an SSN or ITIN (Individual Taxpayer Identification Number) and have a US bank account (refer to our guide on How Foreign Nationals Can Open U.S. Bank Accounts Without SSN or Remotely Before Arriving in the US).
If you don’t have an SSN or Social Security number, you can still apply for a credit card with an Individual Taxpayer Identification Number or ITIN (issued by Internal Revenue Service) and a US bank account.
If you are moving to the US for a job on a Nonimmigrant visa, having an income from the job will help with your credit card application without a US credit history. Similarly, financial institutions will allow international students to apply for a student credit card without established US credit history.
You can get a credit card as a new immigrant or international student with no US credit history in the following ways:
1. Use your credit history from your home country to get a credit card in the US
Some financial institutions or card issuers in the US will be able to use your international credit report and credit history in your home country to process your application for a credit card for new immigrants and international students.
In addition, you might not even need an international credit report for international students as some financial institutions will have special programs designed specifically for international students for building credit in the US while earning rewards and redeeming points for other purchases.
Understanding International Credit Report: An International Credit Report (ICR) might be used to determine your eligibility for credit card products if you have no or thin US credit history. An ICR is a third-party report used to compile credit information from your home country or any countries where you might have a financial history.
2. Apply with a credit card issuer that uses non-traditional data points to determine your creditworthiness
New immigrants and international students are often left out of the US credit system that uses traditional credit scores or FICO score systems to determine your creditworthiness. However, new innovative lenders in the US have realized the need for credit for Newcomers to the USA.
Instead of relying on the traditional FICO-based method to determine creditworthiness, these new innovative lenders and credit card issuers use non-traditional data points such as your occupation, education level, current income (if you’re a professional on a nonimmigrant visa), or your school and major (if you’re an international student), to build your credit profile and issue credit cards to new immigrants. You may not even need an SSN (Social Security Number) to apply for these credit cards designed specifically for US Newcomers.
3. Get a secured credit card in the US
A secured credit card is a type of credit card that requires the borrower to put down a cash security deposit or savings as collateral. The secured credit card issuer sets the deposit amount and can be anywhere from $250 to $5,000, depending on the card issuer’s decision.
The funds on the account are used as protection against borrowing money from an issuer and paying off less than what you owe them. In addition, secured credit cards are a great way to establish credit for new immigrants and international students who are just starting on their path of building credit in the US.
4. Use your relationship with an international bank in your home country
Some international banks might use your existing relationship with them in your home country to issue you a credit card in the US. Such banks will issue you a credit card if you have an account with them back home and they’re willing to extend their relationship overseas.
You will need documentation to prove your residency status in the U.S., such as a passport, valid US visa (or other proof such as an I-94 if you’re from a visa waiver country), and a bank statement from your home country that establishes a relationship with the bank overseas.
5. Apply for a US credit card issued to international students
For international students, it is possible to apply with your student ID and bank account information as proof of residence at your college or university – make sure you know the credit card requirements before applying and are maintaining good credit practices to help build your credit history in the US.
6. Get a US credit card with a co-signer
A new immigrant or international student can apply for a credit card by using their family member, friend’s, or spouse’s information as the co-signer on the account. They will be responsible for making payments if you don’t.
A co-signer has an established US credit history, which can improve your chances of getting approved for a loan or credit card when applying. Before applying, check with your prospective co-signer and be sure they know what they are getting into.
Building credit without using a credit card
New immigrants can build credit without applying for a credit card, though credit cards might be the easiest and fastest way. The truth is, there are several ways to build credit without having to apply for a credit card, as outlined below:
1. Become an authorized user
A significant other or family member may agree to add you as an authorized user on their credit card. This will allow for the carryover of payment history to the credit bureaus, and depending on the payer’s credit score, it can also help improve your FICO score.
It’s unnecessary to use the card or even have it in your possession to be an authorized user. However, make sure to find out if the card issuer reports authorized user activity to credit bureaus.
2. Take a credit builder loan
US Newcomers may want to consider applying for a credit builder loan as an alternative to credit cards. These loans will build credit by reporting payment activity to the credit bureaus. Typically, the money you borrow is held by a lender in an account to ensure you can repay your loan. The downside is that you may have to pay an interest rate higher than you may earn through the money deposited with the lender.
3. Get credit for paying the rent
US Newcomers can improve their credit score by having their rent paid on time reported to the bureaus. Some landlords and property management companies report rental payments to credit bureaus. However, if your landlord is not reporting your on-time rental payments to the credit bureaus, some services can automatically do so for you.
4. Report your utility and mobile phone bills directly to the credit bureau
Some credit bureaus like Experian will credit you for the utility and mobile phone bills you’re already paying. Previously, these payments did not positively impact your score. If you’re not using a credit card to build your credit history, make sure you take advantage of this credit build opportunity.
How to Build Credit and practice good credit habits
When you open your credit card account, it can take up to 6 months to build your credit score. The credit score is based on your payment history, debt levels, and other factors such as outstanding loans. The higher you can get your credit score, the lower the interest rates will be for any future loan or card application.
As a recent US Newcomer, make sure that you follow the below tips to build and maintain a healthy credit score:
- Pay your credit card bill on time and in full each month to avoid interest charges, late fees, or penalty rates.
- Keep balances at 30% or lower than your total credit limit (whichever is greater)
- Review your credit reports from the three credit reporting bureaus – Experian, Equifax, and TransUnion. In addition, most credit card issuers will provide you with a free copy of your credit report as an added service.
- Check your credit score monthly to identify errors or inaccuracies.
- Keep your credit utilization low by maintaining a balance below the limit on your credit card.
- Have more than one type of credit that reports to each bureau (e.g., auto loan, personal loan, etc.)
- Don’t apply for too many credit cards or other credit accounts in a short time, as they will hurt your credit reports.
- Avoid applying for multiple credit cards from the same financial institution as this can affect your credit history, even if you are denied for all of them.
- Consider requesting a credit limit increase for your current credit card(s) after you have established a timely payment history with your credit card issuer.
- Do not use your credit card for cash advances or to pay off other loans. This can negatively impact your credit score, in addition to costing you a lot more.
The best way to build and maintain good US credit is by making sure that you pay on time with credit cards, utilities, and rent.
We’ve provided you with some helpful tips on establishing your credit history as a US newcomer and getting approved for a new credit card in the USA with no or thin US credit history. Keep the best practices outlined in this blog in mind if you’re planning on establishing yourself financially while living abroad in the US. If you are new to the US, you may think it’s hard to build credit and get approved for a US credit card with no or thin US credit history, but that’s not really the case! We’ve outlined some of the best ways to get a credit card for new immigrants and international students who want to build their credit score in the USA.
Frequently Asked Questions (FAQs)
Can a foreigner get a credit card in the US?
Yes, they can. It is important to build a credit history with US banks and lenders to build credit.
Refer to our step-by-step instructions on how to get a credit card as a recent immigrant to the USA.
How do new immigrants get credit cards in the US?
New immigrants can get credit cards with no credit history in the US.
Refer to our step-by-step instructions on how to get a credit card as a new immigrant or an international student.
What is the best way for a new immigrant or an international student to build their US credit?
The best, easiest and fastest way for US Newcomers to build credit is by getting a credit card by exploring credit card options available to newcomers with no US credit history.
What is good credit score?
A credit score of 700 or above is generally considered good.
Should international students build their credit while abroad?
Yes, it’s a good idea to start working on building your credit in the United States while you’re abroad. You may be able to apply for a credit card without SSN if you’re planning to study in the United States. You can use this credit card to pay for bills and utilities online and start your journey towards building credit in the USA.
Where can I check my credit report for errors or inaccuracies?
You can contact the three credit agencies, Equifax, Experian, and TransUnion, and request a free copy of your credit report.
How long does it take to build your credit score with a US credit card?
It typically takes six months of credit activity to generate a FICO credit score. Therefore, you will need a history of around six months of on-time payments for a good credit score.
Can I apply for a credit card without SSN?
Yes, certain lenders will allow you to apply for a credit card without an SSN or use an alternate identification such as an ITIN.
Refer to this section in this blog for details.
Can I apply for a credit card with ITIN?
Yes, certain lenders will allow you to use ITIN (issued by IRS) to apply for a credit card if you don’t have an SSN.
Refer to this section in this blog for details.