How an immigrant can create a good credit history from scratch: step by step instructions

If you've just moved to the US, your finances will get a fresh start too. But immigrants with no credit history in the States can find it difficult to rent an apartment, buy a car, or even get a mobile phone plan. Before making any major purchases that require a loan, you need to create a credit history. How to do it right, says CitizenPath.

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Even if you had excellent credit history in your previous country of residence, it usually does not carry over to the United States. US credit reports contain information only about US creditors. Some of them may want to use your previous loan. However, with enough little effort, immigrants can get good credit in just a few months.

What is a credit rating in the USA

If you're not already familiar with the concept of credit and credit score, it's pretty simple. Most people need a loan to buy a home, buy/lease a car, or make many large purchases. But credit is provided even for a mobile data plan. Lenders who give you money to buy a car or give you credit for phone calls want to know that the funds will be repaid on time. Building a credit history is simply building a positive payment history. A good credit score is a good record of your payment history. This tells future lenders that you have a good reputation for paying money on time.

There are three major American credit bureaus—Equifax, Experian, and TransUnion—that collect credit information. When you apply for and receive a loan, the lender notifies the bureaus of the existence of the account and your activity. The credit bureaus develop a special document for each person that shows what bills you have, how much you owe, and whether you pay your bills on time. They convert this information into an easy-to-read number—a credit score.

Credit scores range from 300 to 850, with 700 or higher generally considered good. The most common type of credit score is called a FICO score. Lenders typically offer higher rates to borrowers with good ratings. Those without a credit score—such as new immigrants—may have difficulty qualifying for some loans due to a lack of history.

On the subject: Just complicated: how does a FICO rating differ from a credit rating

Bad credit score vs no credit score

A bad credit rating is very different from no credit rating. If you don't have a credit history, lenders don't have any information. On the other hand, a poor rating is usually the result of late payments, inadequate payments, or lack of them. It can take many years to fix a bad story. But in some cases, lenders can provide loans to immigrants without credit history.

How to transfer credit history from another country to the USA

Building a good credit score in America takes time. It can take years! But it is absolutely achievable with diligent effort. However, it won't work quickly if you need certain loans right away and have recently moved to the United States.

Alternatively, if you're new to the US and want to apply for financial products, you can transfer your credit history from your previous country of residence using Nova Credit. Nova Credit is connected to the world's leading consumer credit bureaus to provide your credit history for use by American lenders, real estate rental companies and others. The system translates credit reports from countries such as Mexico, India, Australia, UK and others into equivalent reports for US creditors. This allows you to use your international credit document to apply for loans, apartments, and more in the United States.

Five tips for immigrants to build a credit history

By diligently taking small steps to create a positive story, most immigrants can get good credit within a few months. Since credit builds up over time, patience is needed. Start today and keep good habits.

Step 1. Apply for a Social Security Number

The Social Security Number, or SSN, is a unique nine-digit code assigned to Americans to track income and benefits. It is issued by the Social Security Administration. Typically, you need an SSN to get a job, get social security benefits, and access some other government services. Banks and credit card companies may also ask for your SSN when applying for a new credit card, as this helps them verify that you are who you say you are.

In most cases, only immigrants who have permission to work in the United States can obtain a Social Security number. If you are not eligible for an SSN, you can request an Individual Taxpayer Identification Number (ITIN). ITIN may replace SSN until you receive one.

Step 2. Open a secure credit card

Since you currently have little or no credit history, opening a standard line of credit will be difficult or impossible. You may be eligible for a credit card from CreditStacks—designed for professionals who have recently moved to the United States. However, banks and other lenders usually consider you a risk simply because they don't know anything about you. You can reduce this risk by offering collateral. With a secured credit card, you make a deposit, and the credit card company usually issues the card with a spending limit equal to the deposit. Essentially, you are using your own money, building a credit history in the process. If you use them responsibly, you will receive a positive credit report and credit rating.

On the subject: Three ways to clean up your credit history

Step 3. Apply for a loan for construction loan

A credit building loan is another great way to build a positive credit history. The lender transfers a small amount of money into a secure savings account on your behalf. This is a loan that remains in the account. You pay it in monthly installments. Once the loan is repaid in full, the money in the savings account is yours to use as you wish. You've increased your personal savings and built credit.

This loan is not used to make a purchase right away. Think of it as a savings account that also helps you get credit. It's important to know that you'll be paying interest, but it helps develop good saving habits. Most lender loans are small, ranging from $300 to $1000. This means you will have low monthly payments. They are also usually easy to qualify for.

Step 4. Use accounts responsibly

After you create one or two accounts, develop good habits and demonstrate that you are a reliable and trustworthy borrower. Here's how to do it:

• Make timely payments

Pay your bills on time. This also applies to rent and utility bills. If you are running late and have outstanding balances, companies will often share your payment history with credit agencies. Unpaid invoices can be sold to a collection agency, negatively affecting your credit rating. If you got a credit card, most companies have an app or way to automatically set up your payments so they go out on time, even if you forget.

• Do not abuse credit

Credit utilization is the amount of your credit limit you use each month. Many credit experts recommend keeping your credit utilization at 30% of your total credit limit. Pay your balance in full every month. If you want to use your card more often, you can pay with it several times during the month. For example, if your credit limit is $300, try to keep your total expenses under $100. If you want to use the card before the next billing cycle, deposit $100 before withdrawing additional funds.

• Don't close accounts

Another credit rating criterion is the age of the account. Keep your accounts open as long as possible. Eventually you will need to open another account to continue building credit, buy/lease a car, or whatever. Each new account reduces the average age of your account. Since a longer credit history is better for your credit score, don't open too many accounts at once.

Step 5. Keep track of your credit score and credit report

Many websites and credit card companies will let you check your credit score for free and as often as you like. Each of the three major credit bureaus usually maintains a credit report for you. You can get a copy of your credit report from each of these agencies for free once a year. By tracking these reports, you can check for any discrepancies that could negatively affect your credit rating. Order your report online at Annualcreditreport.com or call 1-877-322-8228.

How long does it take for an immigrant to create a credit history

It can take several months for immigrants without credit to create a positive credit report. Typically, it takes at least three months, and possibly six months of activity, to calculate a credit rating. Many immigrants can get good points throughout the year. If you continue to keep accounts and use them responsibly, your credit score will grow over the next few years.

You may be interested in: top New York news, stories of our immigrants and helpful tips about life in the Big Apple - read it all on ForumDaily New York

Transfer of credit history from ITIN

If you had an Individual Taxpayer Identification Number (ITIN) and have already opted out of using it after you received a new Social Security number, you will also want to share your credit history. It is not automatically transferred from ITIN to SSN. You will need to contact all three credit bureaus and ask them to submit your credit history.

Step 1. Write letters to all three credit bureaus

Contact the three major credit reporting agencies and ask them to transfer your credit history to the new SSN. Your letter should explain that you have a new SSN and would like to transfer your credit history from your ITIN. Download the template at this link... The letter must be sent to the addresses:

Equifax Information Services
PO Box 740241
Atlanta, GA 30374

Experian
PO Box 2002
Allen, TX 75013

Trans Union Corp
PO Box 1000
Chester, PA 19022

Be sure to include a copy of your ITIN, Social Security Card, Employment Authorization Card, and a recent utility bill or bank statement with your name and current address (or state ID / driver's license if you have one) ... This will help identify you and make translation easier.

Step 2. Check your free credit reports

Credit agencies must send you confirmation of the change within 2-4 weeks. If they ask for more information, please respond fully and quickly. After you receive confirmation that your credit history has been reported by each agency, you should check your credit reports to ensure that all three credit reporting agencies have made changes.

Step 3. Provide your SSN to lenders

Provide your new SSN to the financial institutions you are using and ask that your new SSN be applied to your accounts. For bank accounts, you can make changes at your local branch. For credit card companies, call customer service.

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