Video: Building credit as a new US resident
Immigrants who become permanent U.S. residents might think the hard work is done. However, while you’re sorting out your new life and finding a new home, you’ll discover you need to build a new credit history in order to rent, buy or borrow.
Francesca Douglas and her family discovered that the hard way when they moved to the U.S. from England. Despite good jobs and a stellar credit record in the U.K., they were hard pressed to get any kind of credit in their new country.
“It’s quite disheartening because you just want to get on with your life and you want to start this new adventure and then you realize that they’re going to look for your credit score and that there is going to be nothing there,” says Douglas who built credit as a new U.S. resident.
You can’t build credit overnight. However, if you start now and follow these tips - you’ll be on your way to not only building credit, but building good credit which is crucial.
1. Learn about credit.
Before you start applying for loans or credit cards, the most important step is to learn about the U.S. credit system. Good credit requires paying your bills on time, and keeping your credit card balances low.
2. Become an authorized user.
Armed with some knowledge you may want to ask a spouse, friend or relative who has already established credit history in the U.S. to add you as an authorized user to their credit cards. This will allow you to piggyback off of their credit history - but beware: If they don’t pay their bills on time, your credit record will reflect their bad behavior.
3. Get a credit builder loan.
Another option: a credit builder loan. There are different types, so talk to your bank or credit union. You may be required to already have some money in the bank to secure the loan, or a lender may front you the money. Some online institutions, such as Self Lender, offer these loans too.
“What you do is you join Self Lender. We then lend you some money that goes into a CD and it stays there for a year, so you can’t spend it. It forces you to save. And the customer experience is ‘I make these monthly payments and at the end of the term, my loan is paid off and my CD matures,” says James Garvey, founder of Self Lender.
4. Get a secured credit card.
You can also build credit through a secured credit card - which requires you to pay a deposit, usually equal to the card’s credit limit. Paying it off on time demonstrates your creditworthiness over time.
"We went in to one of the major department stores and were offered a credit card with a limit of $50 and we had to prepay the $50,” says Douglas.
5. Apply for store or gas station credit cards.
Store and gas station credit cards are also options as they sometimes are easier to get than other credit cards. Douglas’ top tip?
“I’d say one thing you definitely need is patience,” says Douglas.
Once you have a credit account for six months, you’ll achieve another part of modern American life: You’ll have your first made-in-the-USA credit score. While it may feel like a long process, building credit is one of the most important steps you can take in your new country.
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