A new partnership between Amex and Nova Credit has made it easier for immigrants to establish credit in the U.S. However, it’s not a cure-all, and most lenders are not yet incorporating foreign credit reports into their underwriting decisions. But there are other ways to build credit if you’re new to the U.S.
This is a welcome development. Previously, immigrants were forced to rebuild their credit from scratch after relocating to the U.S., even if they had excellent credit in their home countries. That wasn’t fair, and it contributed to FICO’s finding that 53 million U.S. adults have such little credit information on file that they can’t even receive a reliable credit score.
With consumers’ permission, Nova Credit, a cross-border credit reporting startup, will share their international credit reports with American Express when these individuals apply for an Amex U.S. personal card.
Right now, five countries are included in the program: Australia, Canada, India, Mexico and the United Kingdom. Amex and Nova Credit say more will be added in the future.
“We believe that no matter where you build a credit history, you should be able to keep it,” Sarah Davies, head of risk and analytics at Nova Credit, said in a news release. “By translating international credit records from top bureaus around the world into a U.S.-equivalent score and enabling newcomers to share their credit history with U.S. underwriters like American Express, we are helping people who move to the U.S. to arrive and thrive.”
I completely agree! This is fantastic news, although it’s not a cure-all for immigrants, unfortunately. Most lenders are not yet incorporating foreign credit reports into their underwriting decisions.
Here are some other ways to establish credit if you’re new to the U.S.
See related: How an immigrant can build credit in the U.S.
Sign up for a credit card you believe you will qualify for
If you’re from Australia, Canada, India, Mexico or the U.K. and have established good credit there, American Express cards are now a viable option.
If you already have a credit card from a different international issuer that has a presence in the U.S., ask if it will issue you a U.S. credit card. Your existing relationship might help. HSBC, Barclays and TD Bank are good examples.
You could also include the Petal® Visa® Credit Card in your search. This card was conceived with young adults and immigrants in mind – people who might have good incomes and responsible financial habits, yet often fall through the cracks of the traditional credit scoring system. Petal is able to approve a lot of these people because they take a detailed look at applicants’ finances that goes well beyond their credit scores.
TomoCredit is another credit card that fits this mold. It was founded by a South Korean immigrant, Kristy Kim, who knows from first-hand experience how difficult it can be for newcomers to qualify for loans in the U.S. The former investment banker and University of California-Berkeley grad told me she felt “like a gangster” when she was declined for a car loan and forced to pay with cash instead.
You can also piggyback off someone else’s credit card. Let’s say you have a spouse, sibling or friend with a U.S. credit card – ask them to add you to their account as an authorized user. Just make sure you and they use the card responsibly (paying on time, keeping credit utilization low, etc.) because both good and bad credit behavior translates to authorized users.
Secured credit cards are another option, but I’d view them as a last resort. Most don’t offer rewards, they require cardholders to tie up several hundred dollars in a deposit for six to 12 months and they typically offer low credit limits. Still, despite their limitations, secured cards can be a useful way to build or rebuild credit.
See related: 3 immigrants share how they achieved credit scores over 750
Report your rent
It’s unfortunate that rent – the largest monthly expense for many households – rarely factors into one’s credit score. But where there’s a will, there’s a way.
As my colleague Kelly Dilworth wrote, “A number of third-party companies, such as RentTrack, Rock the Score, Rent Reporters or Rental Kharma, will report your rent payments on your behalf. You just need to sign up for their service and work with them to verify your payments. The fees can be a bit steep…however, they may be worth it.”
Give Experian Boost a try
Cellphone and utility payments have not traditionally counted in the popular credit score algorithms, either. Experian Boost is now incorporating these with consumers’ permission.
Between February and August, the company said more than 1 million people signed up. About six in 10 enjoyed a higher credit score as a result – the average jump was 13 points. If your score goes down due to Experian Boost, the company suggests you revoke permission to look through your bank account, and your score will go back to where it was.
Save and build credit simultaneously
Credit builder loans are basically a form of forced savings. You set aside money each month (generally for six to 24 months), and you get to keep almost all of it at the end. The best credit builder loans charge minimal fees and report to the credit bureaus. The most favorable terms are often found at credit unions and community banks.
For maximum impact, try to do several of these things concurrently. By filling your credit reports with positive information and demonstrating that you can handle various types of credit responsibly, you’ll be on your way to a solid credit score as quickly as possible. You can achieve substantial progress in as little as six months.