New arrivals to U.S. need to rebuild credit history
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Dear Credit Score Report,
I have just moved to the United States from the United Kingdom. I have a good credit history in the U.K., but none here. I have a good well paying job here in the states. The problem is I have no credit history. I cannot even get store cards. Is it possible to transfer my U.K. credit history? -- J.
As a new arrival to the United States, you'll need to rebuild your credit history from scratch, using any financial relationships you have already established to get started.
Unfortunately, J., the credit history you established in the United Kingdom doesn't carry over to the United States. That's because different credit reporting systems, laws and technical hurdles make sharing credit information across international borders a difficult process, even when the credit bureau has operations in both countries. But having already established a credit history abroad -- and a job domestically -- means you have some existing financial relationships that can help you secure a loan. Once you've secured an initial line of credit and prove you know how to use it responsibly, it will only be a matter of months before your payment history will generate a U.S. credit report.
To get that first loan, experts recommend using any existing financial relationships. You mentioned, J., that you had a good credit history in the United Kingdom. If any of the banks you used overseas also have a presence in the United States, they may be the first place to go for help. Lenders such as American Express and Barclays operate in both countries and express a willingness to enable their customers make the transition across the pond. While the process won't transfer any credit history, AmEx is able to open a new account in each of its markets based on prior payment history, spokeswoman Kim Forde explains. Barclays also says it can provide some assistance. "We certainly would like to take care of a BarclayCard customer who is living in the U.S., and that can be arraigned through a banker in U.K. or by getting in touch with us separately," says BarclayCard U.S. spokesman Kevin Sullivan. HSBC, meanwhile, says its premier account offers specialized service to help customers who have moved abroad.
If you don't already have a relationship with such a lender, you aren't out of options. Here are some additional ways to establish credit in the United States:
- An employer: Find out if your company has experience with employee relocation, since corporations (especially those operating internationally) probably do. If they can't help you, see if they can at least provide a letter verifying your employment and income that you can show to potential lenders.
- A U.S. bank: If you already have a bank account, make an in-person visit to your local branch and apply for a small loan or a credit card. Bring supporting documentation, such as the employer letter, a copy of your U.K. credit report, proof of a recurring bill payment (such as from a utility or cable TV company) and additional paperwork to confirm your identity, U.S. income and regular payments.
- Lenders familiar with helping immigrants. Contact a lender that has experience opening accounts for borrowers who have immigrated to the United States. American Express, for example, says it has a process to approve such applicants using their income level in combination with a review of their assets and other factors.
- Local friends and family: People you know and trust -- and likewise know and trust you -- might allow you to piggyback on their credit card accounts as an authorized user. Becoming an authorized user means that you get the benefit of the primary cardholder's solid credit history. But choose that person wisely, since any mistakes made by the primary cardholder can also hurt your credit.
This may sound like a lot of work, but these steps are necessary. Since banks are very wary about lending to someone without a credit history, "you have to do everything you can now with the banks to prove you are a good credit risk," says Nancy Monk, executive director of Global Alliance, Prudential Real Estate and Relocation Services, in Shelton, Conn.
If you've tried all these tips and still can't get a loan, consider applying for a credit card designed for borrowers with little or no credit. Secured cards offer credit to people with limited or poor credit history by essentially creating a savings account from which the lender can draw if the borrower fails to make payments. Before applying for this type of plastic, however, first make sure that the secured card issuer reports account activity to major U.S. credit bureaus Equifax, Experian and TransUnion. Those bureaus will record all the information that eventually shows up on your credit report. Should you apply for a secured card that doesn't report, your responsible payment history won't help you build a credit history. There's another thing to be wary of: When it comes to secured cards accounts, "open [them] carefully because some secured credit cards are marketed to consumers with poor credit. They may have high fees and interest rates," says Sandy Shore, senior counselor with New Jersey-based consumer credit counseling agency Novadebt.
Once approved, whether it's a secured card or some other type of loan, be responsible with your newfound debt. Make regular, on-time payments to your bank, keep any balances as low as possible and take on additional debt only when necessary.
In about half a year, your responsible borrowing will be rewarded. "It would take about six months, but assuming you have one bank card and you have six months of impeccable credit history and utilization -- you could get a really good credit score," says Chet Wiermanski, global chief scientist with TransUnion. Once you have enough credit history to generate a credit score, maintaining the same good habits over time will help your score continue to rise, which will mean easier, lower-cost access to U.S. credit in the future.
See related: Credit scoring goes global, Will there be a global credit score someday?, Cardholders' mistakes can bring down authorized users' credit score, Tips for immigrants building a U.S. credit history
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