Immigrants can achieve high credit scores in the U.S., even though our system is confusing
Newcomers to the U.S. can achieve high credit scores just like natural-born citizens, if they know where and how to start.
In fact, establishing a credit history may be the most difficult part of building credit for an immigrant in the U.S. Fortunately, there are many credit-building options, including secured credit cards, credit builder loans, becoming an authorized user on a spouse’s or family member’s card or having someone co-sign for a card or a loan.
Beyond that, it can take time for to grasp the complexities of the U.S. credit system. And the burdens of building a life in a new country may take precedence over something seemingly so mundane as building credit.
“An immigrant may be so busy working and paying bills that the whole concept of credit is just not their main focus,” said Corey Vandenburg, a mortgage broker in Lafayette, Indiana, who helps non-U.S. citizens establish credit. “Their main focus is survival. I think we don’t do a good job of communicating the importance of credit until it’s time to make a major purchase.”
But those who are aware of the importance of building a credit profile as soon as possible face the same learning curve as everyone else. Achieving a high credit score requires making payments on time and using a minimal amount of your available credit – two factors that account for 65 percent of your credit score under FICO’s formula. Other factors that can boost your score include having a long credit history with a mix of different trade lines and minimizing your use of new credit.
Here’s how a few immigrants have achieved scores above 750, which is considered excellent.
The \u2018learning curve’ of credit scoring
A native of Poland, Ania Czarnecka and her English husband both moved to the U.S. in the mid-2000s to attend graduate school. Now a permanent resident and an account executive at a communications firm in Houston, Czarnecka has achieved a credit score above 800 with just credit cards.
Czarnecka started her U.S. credit history as an authorized user on a card her husband was issued after he finished grad school and landed a job. She was able to get a Social Security number and her own cards when she got a job as a graduate assistant and, later, when she started her career.
Even though she has never missed a payment, Czarnecka said her credit score languished around 600 for a while. A few canceled cards along the way didn’t help.
“That was a learning curve for me,” Czarnecka said. “You’re tempted to get the next best card and cancel the \u2018old’ card. I noticed immediately that my credit score was worse when I did that, so I have not canceled any cards since.”
Czarnecka said she and her husband have not taken out any loans – they’ve been fortunate enough to pay for their home, car and educational expenses with cash. Meanwhile, they use rewards and cash back cards for everything “from travel to grocery shopping,” she said. Czarnecka keeps her credit utilization below 10 percent at all times and pays her card balances in full each month.
From high-interest loans and identity theft to an 800 credit score
Italian immigrant Andrea Cassar was surprised to learn that a bank from which he requested a loan couldn’t use his foreign credit history when he first moved to New Jersey in 2004. He had to start his credit profile from scratch, taking out a small loan with a high interest rate to pay for a car and a living room set.
Even though he was still a student, he was able to make on-time loan payments that were higher than the monthly minimum required.
Now a U.S. citizen and vice president of a public relations firm, Cassar has a credit score of 810 – a milestone that was hard-earned. It hasn’t been easy, though. Cassar struggled financially during his early years in the U.S., and his wallet, containing two credit cards and his Social Security card, was stolen.
That sent Cassar spiraling into debt and ruined his credit rating, which he had built up to a score of 700. Both of his credit cards were used for bogus charges, and he said the bank refused to reimburse him for the fraudulent charges.
“When I had my cards stolen, my score dropped to the 300 range,” Cassar said. “My bank refused to absorb the fraudulent charges. After hiring a lawyer and paying over $3,000 in debt, I was able to regain a good score and steadily build it back up over time.”
With his financial and theft-related troubles long past, Cassar maintains his high credit score by keeping only a few credit cards and never using more than 25 percent of his available credit. And he carries only one card with him at any given time just in case his wallet is stolen again.
A fresh start in credit
Film and theater director Mike Hayhurst is a permanent resident who moved to New York City from the United Kingtom more than seven years ago. With no U.S. credit history of his own, he and his American wife were forced to ask her father to be a guarantor when they signed a lease for their first apartment.
“It’s tough being told as a newlywed that you can’t provide for your wife, but it was all part of the adjustment process,” Hayhurst said. “I had to learn as much as possible, as quickly as possible.”
Hayhurst had to wait until he received a Social Security number to open a bank account. Eventually, his bank offered him a credit card with a limit of $500. Hayhurst charged $100 to the card each month and always paid the balance in full.
A slew of pre-approved card offers followed, and he applied the same payment discipline to the new accounts he opened. Hayhurst steadily built up his credit score to more than 760, and it helped him start his own production company.
“In some ways moving to the U.S. gave me a blank slate,” he said. “I got to do things the right way when I already had financial discipline, as opposed to carrying youthful mistakes with me on my credit report. I don’t always understand the U.S. credit system, but it has allowed me to live my version of the American dream.”
Financial responsibility transcends boundaries
Any immigrant can be forgiven for failing to understand a credit scoring system that still confuses many Americans. Nevertheless, a strong credit history can be critical to putting down roots in this country. A high credit score can help you get the best terms on credit cards and loans that allow you to own a house or car or start a business.
Achieving a high credit score is simply a matter of managing your finances responsibly – a life skill taught in cultures all over the world.