Moving to the United States can be a deeply rewarding experience – but it can also be infinitely challenging.
One of the biggest difficulties many new immigrants face is trying to understand this nation’s credit system. Because credit, credit cards and credit scores are deeply woven through the entire American financial system, immigrants often struggle to establish and build the credit histories they need to gain the secure foothold they need.
Why is it hard for immigrants to build credit?
Essentially, it all comes down to the fact that the credit system used in the United States is unique. Other countries have their own system for determining if someone is “creditworthy” (or not), and some countries have no formal credit system at all. That can make the system here very hard to fathom.
Why is building credit so important for immigrants?
A strong credit history can significantly impact someone’s ability to secure housing, obtain loans for major purchases (such as vehicles) and even affect their job prospects. Good credit is basically a key that unlocks economic opportunities and financial independence.
If you’re an immigrant, where do you start?
- Apply for a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN). Which you are eligible for depends on your current immigration status, but that’s the nine-digit number to which your credit will ultimately be tied.
- Open a bank account. Some lenders won’t issue credit unless you have an established U.S. bank account. That gives them some leverage (and some assets to try to claim) if you would fail to repay your debts. It also shows that you’re tying yourself to the community, which can increase a lender’s trust.
- Apply for a credit card. This is how you begin to establish a credit history and a credit score. You may initially only qualify for a card that’s secured by a cash deposit (meaning that if you deposit $250 into an account with the lender, you will then be extended $250 in credit). Over time, as you show that you’re responsible about making payments, you may then reclaim your deposit and convert to an unsecured credit card with a higher limit.
Building credit is a gradual process that requires discipline with your financial habits – but the rewards will almost certainly be worth it as you continue on your immigration journey.