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Legal, Regulatory, and Privacy Issues

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

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

Summary

Under a new rule, the government may 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, now that a Supreme Court ruling will allow the government to start using aspects of an immigrant’s financial life to determine citizenship.

Those applying for citizenship have long had to show they have the financial means to take care of themselves. But in August 2019, the Trump administration unveiled a new rule that would deny permanent legal status to those deemed to be a public charge – a person dependent upon the government for their welfare.

The rule, titled Inadmissibility on Public Charge Grounds, was slated to go into effect Oct. 15, 2019, but temporary injunctions issued by several federal courts kept it from going forward as legal challenges were heard.

But on Jan. 27, 2020, the Supreme Court voted 5-4 to lift the nationwide injunction, giving the government the OK to move forward with the public charge rule even as legal challenges continue to play out. Only in the state of Illinois is the public charge rule still placed on hold, as a statewide injunction is in effect there.

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

A controversial change

The rule unveiled by the Department of Homeland Security (DHS) last August included guidelines that would help determine whether an immigrant would be likely to become a public charge.

Under the guidelines, 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 they have the money to pay for private health insurance. The rules would apply to immigrants seeking a visa or a change in their immigration status.

In the determination to lift the nationwide injunction, justices voted along ideological lines in favor of the conservatives.

In an opinion released with the ruling, Justice Neil M. Gorsuch wrote critically of the practice of issuing nationwide injunctions, stating: “As the brief and furious history of the regulation before us illustrates, the routine issuance of universal injunctions is patently unworkable, sowing chaos for litigants, the government, courts and all those affected by these conflicting decisions.”

However, some pro-immigration groups disagree, saying the Supreme Court’s decision allows the public charge rule to go into effect even if it’s later determined to be unconstitutional.

“Such an action by the Court undermines precisely why courts are asked to issue such injunctions in the first place: without them, legally questionable policies become law subjecting vulnerable Americans to rules and decisions that may ultimately prove to be unlawful,” said Abby Leibman, president of anti-hunger organization MAZON, in a statement.  “At best, this creates confusion and fear; at worst, it will result in America turning its back on immigrants who heretofore would have been welcome in our country.”

Zeroing in on credit

There are a number of good reasons to look at an immigrant’s credit, according to the rule.

“Credit reports and credit scores provide information about a person’s bill paying history, loans, age of current accounts, current debts, as well as work, residences, lawsuits, arrests, collections, actions, outstanding debts and bankruptcies in the United States,” the rule reads. “DHS’s use of the credit report or scores focuses on the assessment of these debts, liabilities and related indicators, as one indicator of an alien’s strong or weak financial status, so that in the totality of the circumstances and as part of all considerations affecting the alien, the alien is more or less likely to become, in the future, a public charge.”

According to the rule, a good credit report would be one that that is “near or slightly above the average of U.S. consumers.” While the rule does not specifically state how it would measure a good credit ‘score,’ FICO in September said the average U.S. FICO score was 706.

But achieving a 706 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 the rule 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: Credit card approval tips for new immigrants

Deciphering the impact

So what kind of impact might the rule 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 upward 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 waitlist who can clear the tighter standards.

See related: 3 immigrants share how they achieved credit scores over 750

What immigrants can do to improve their credit scores

While the rule is still undergoing legal challenges, for now it will go into effect. However, 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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