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Immigrants may need good credit to stay in the U.S.

A proposed rule could set a high credit bar for immigrants seeking visas, citizenship

Summary

Under a new proposal, the government would review the credit histories and credit scores of immigrants seeking visas or other status changes. But achieving a high U.S. credit score is an obstacle for many immigrants.

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A high credit score can be the key to a better financial life. But for new immigrants, it may soon unlock the door to becoming a U.S. citizen.

Those applying for citizenship have long had to show they have the financial means to take care of themselves. But proposed changes to how the government determines whether someone is likely to become a public charge – a person dependent upon the government for their welfare – would look at more aspects of an immigrant’s financial life.

In October, the Department of Homeland Security (DHS) released proposed guidelines to help determine whether an immigrant would be likely to become a public charge.

“Under long-standing federal law, those seeking to immigrate to the United States must show they can support themselves financially,” said Kirstjen Nielsen, the secretary of Homeland Security, in a statement.

Under the proposal, the government would look at such criteria as credit histories and credit scores, and whether the immigrant has used public benefits in the past and whether he has the money to pay for private health insurance. Currently under a 60-day public comment period, the rules would apply to immigrants seeking a visa or a change in their immigration status.

Zeroing in on credit

There are a number of good reasons to look at an immigrant’s credit, according to the proposed guidelines. Credit reports contain a wealth of information on a person, such as their bill payment history, loans and bankruptcies. Credit scores can also shed light on someone’s financial situation.

“A good credit score in the United States is a positive factor that indicates a person is likely to be self-sufficient and support the household. Conversely, a lower credit score or negative credit history in the United States may indicate that a person’s financial status is weak and that he or she may not be self-sufficient,” the proposal reads.

According to the proposal, a good credit score would be one that that is “near or slightly above the average of U.S. consumers.” In September, FICO said the average U.S. FICO score is 704.

But achieving a 704 credit score may not be easy for many immigrants. Since credit isn’t transferrable from country to country, newcomers to the U.S. typically must start from ground zero when building a credit history.

As a result, many immigrants don’t have a credit report or credit score. DHS recognizes that fact in its proposal and says immigrants won’t be penalized if they don’t have a credit report or credit score to be considered. For those who don’t have a credit history, U.S. Citizenship and Immigration Services might consider other evidence that an immigrant pays bills on time or carries little debt, such as bank and bill statements.

Some foreigners seeking citizenship may already have a credit history even though they don’t have a Social Security number, says Rod Griffin, director of consumer education at Experian.

“We don’t require a Social Security number for you to have a credit report. If a lender will open an account, we will match it to any identifying information that’s provided for that individual,” says Griffin.

However, immigrants typically don’t have the benefit of time to build a lengthy credit history, which can be a big factor in achieving a high score.

See related: Immigrants reveal shock, confusion at U.S. credit system

Deciphering the impact

So what kind of impact would the proposed rules have in the real world?

“The impact would be denial,” says Elizabeth Ricci, an immigration attorney with Rambana & Ricci in Tallahassee, Florida.  “Somebody who doesn’t have good credit or who has had some form of public assistance in the 36 months before they apply for permanent residency under this proposed rule could be denied.”

A credit score is a snapshot of your current financial picture. When someone is applying for citizenship, they are not only dealing with the cost of living, but also the extra costs associated with the immigration process. An immigrant might easily pay upwards of $1,500 to file the necessary paperwork, Ricci says.

“Every day when you walk down the street you probably pass somebody who’s got a full-time job and a bad credit score,” says Ed Lazere, executive director of the DC Fiscal Policy Institute, an economic policy think tank in Washington, D.C. “Looking at credit scores is yet another way in which this proposal is screening out anyone except those who are already very well-established economically and not those who have the potential to succeed once they’re in America.”

Not everyone is opposed to strengthening the public charge guidelines. Reihan Salam, executive editor of the conservative magazine National Review, notes that immigrants who come to the U.S. for humanitarian purposes (such as refugees and asylum seekers) would not be subject to the public charge rule.

Salam also said the new rule could help shorten the long line of green card applicants, favoring many immigrants on the wait list who can clear the tighter standards.

See related: Credit card approval tips for new immigrants

“Every day when you walk down the street you probably pass somebody who’s got a full-time job and a bad credit score.”

What immigrants can do improve their credit scores

If the rules go into effect, there are steps immigrants can take to ensure they have the best credit score possible. If you have no credit history or you’re looking to improve your score:

  • Look to alternative data. “If you are renting, which is very common among the immigrant population, your landlord can report your positive rent payments and establish a credit history,” says Griffin. Other merchants may also let you obtain a small loan, but make sure they report your payments to at least one of the national credit reporting agencies, Griffin says.
  • Use credit cards wisely. Griffin recommends signing up for one or two credit cards. Some card issuers allow you to apply with an Individual Taxpayer Identification Number if you don’t have a Social Security number. Make a small purchase each month and then pay it off so you’re not carrying debt. If you don’t qualify for a traditional credit card, try to obtain a secured card.
  • Turn to family or friends. In some instances, immigrants may consider applying for a credit card with a co-signer, says Equifax spokesperson Jacob Hawkins. “As with other credit cards, when someone pays their bills on time each month, this will build credit history. It’s also important to remember that co-signers will be responsible for charges if the applicant isn’t able to pay the credit card bill,” Hawkins says. (However, joint credit card accounts are less common today than in years past. You could also ask a family member or friend to add you to a long-standing card account with an excellent payment history as an authorized user. The history of that account would then be added to your credit report, and only the primary account holder is responsible for paying off any incurred debts.)
  • Check for errors. Make sure your credit report doesn’t include false information that could lower your score.

“Your credit report should be a tool that you use. We want to help people have access not only to credit but to other kinds of important things like living in the U.S. as a new immigrant,” Griffin says.

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