How to Build Credit as an Immigrant

Moving to a new country brings new opportunities but also new challenges. Whether your change is temporary or permanent, understanding and incorporating credit into your financial life can be crucial to integrating into the U.S.

Credit histories can’t be imported from your home country, so you’ll likely need to start building it up again from scratch even if you previously had a good credit rating or none at all.

You’ll learn what you can do to create and maintain good credit as an immigrant, using a range of tools and resources to help establish your financial life in the U.S.

Lenders use your credit score to decide if you’re a good risk to take on. Having a lack of credit or no credit rating at all could put you at a disadvantage for certain financial products and services, such as renting or buying a home or car, getting phone and internet service, and or even applying for a job. For immigrant entrepreneurs, it can also impact getting a loan to start a new business.

Financial institutions and credit card companies want to ensure they’re working with consumers who have a proven track record of paying their debts back in a timely fashion.

If you don’t have a healthy credit score and history, your chances of being approved for loans and lines of credit will be reduced. You may also encounter difficulties in securing credit cards and even bank accounts.

Credit scores have a range between 300 and 850. A score of 700 or above is generally considered to be good.

Landlords and rental agencies typically review potential tenants’ credit reports. They look for a pattern of missed payments or other negative information on your credit reports that indicate you may not pay your rent.

If you have bad credit, the landlord or property manager may require you to pay a larger deposit or get a co-signer. They might even reject your rental housing application altogether.

Likewise, if you’re trying to get a mortgage, lenders review credit scores and reports from the three major credit bureaus as part of the application process. The higher your credit score, the better your chances of getting approved and a lower interest rate.

Home insurance also relies on credit information to determine rates and terms. A poor credit history could make your insurance more expensive or result in a denial.

When buying or leasing a car, your credit score influences the rates available to you. The interest rate you pay on your auto loan is typically related to your credit score.

An excellent credit score often means better loan terms, while a poor credit score means higher interest rates or even denial of an auto loan altogether.

Credit history is also one of several factors auto insurance companies take into consideration when calculating premiums. Auto insurance companies will consider you less of a risk if your credit is good — and your premiums will be lower. The opposite is likely to occur if you have poor credit.

Some employers may look at your credit rating before offering you a job. They must get written permission before they can review a version of your credit report, but they usually do this to look for any major negative records or discrepancies.

This is more likely to happen if the job you’re interested in would involve handling money or some sort of security clearance. If your credit score is low, it may raise a red flag to your prospective employer about your ability to fulfill work obligations.

Showing that you are financially responsible allows you to take advantage of all the benefits that a good credit history provides. If you are only just starting to establish your credit, you’ll want to make sure that you’re building a strong foundation. If you have some credit history but it’s poor or not the best it can be, you’ll want to focus on rebuilding it.

Whatever your situation may be, taking charge of your credit begins with obtaining a credit report.

A credit report contains your credit history, including your borrowing and repayment habits, which makes it different from a credit score. A score is a figure that represents the information in your report.

You can obtain a copy of your report from one of the three major credit bureaus that compile these reports: Experian, Equifax and TransUnion.

As an immigrant, you may not have any record of credit in the U.S. In this case, you’re considered “credit invisible,” which means you have to build up a credit history that will set you in good stead for financial opportunities and services.

While it can be difficult to qualify for financial services, there are still many ways to improve your situation, such as building up a payment history and making regular, on-time payments on credit cards and loans.

Use your credit report to discover where you are and where you need to be. Because each country’s credit rating system is unique to that country's culture, you may not be able to bring over any of your history to the U.S.

You should establish whether you’ll be starting from absolute scratch or if there is any credit you could transfer from your home country.

If you’ve never held a U.S. credit card before, some payments made in the U.S. are reported to credit bureaus. You may actually have a credit file you’re just not aware of.

Establishing credit in the U.S. as an immigrant follows many of the similar guidelines for American-born citizens, but there are a few unique circumstances that come into play.

The best way to build credit is to use a U.S. credit card and make on-time payments. Your credit history will usually determine the kind of card you can apply for. Having at least some credit history means you will be more likely to apply for a beginner card that’s easier to get approved for. If you have no credit history at all, you’ll likely be better off applying for a secured credit card.

If you have no credit or poor credit, your credit card options are more likely to be limited. A secured credit card can help you repair your credit and establish a credit history, so that you can eventually qualify for an unsecured credit card.

You’ll need to send the issuer a refundable security deposit, which will usually be equal to the amount you have access to on the card. Once you've proven yourself — through a record of reliable, on-time monthly payments and responsible use of the secured card — you can then move on to an unsecured credit card.

Here are the steps to follow:

There are other alternatives to secured credit cards that may be available to you. The best alternatives are unsecured credit cards that don’t require a security deposit for approval. But cards of this type can mean tougher approval requirements, higher fees and very little spending power beyond what you can readily afford in cash.

Also, you can’t increase your credit limit simply by paying more, which is the case when you add to a secured card’s deposit.

Unsecured credit cards are considered ideal for those who have no credit history or less-than-stellar credit, since they don't require a security deposit, and there are no associated fees, provided you pay on time.

With a card like Petal, you’ll also earn 1% in cash back rewards. This rewards structure helps instill responsible payment behavior. Another upside to applying for a Petal card is that the company uses information other than your credit score to evaluate your application, which means you don’t need to have credit history to apply for it. Petal will require access to your bank account to see your payment history and assess if you qualify.

Like the Secured Mastercard from Capital One, some cards still require you to back the card with a deposit before you are issued the credit, but the spending limit on it will far exceed what it would traditionally be on a secured card.

With a partially secured credit card, a credit card company only has a partial guarantee that it will be repaid if you, as the cardholder, max out the card. That’s why it’s rare for a secured card to be partially secured from the start.

If you’re not able to pay off the full balance of your credit card each month, a low-interest credit card would be your next best bet. You will, however, need to have a good score to be eligible.

A low-interest rate credit card typically features either a low fixed interest rate, or a low fixed rate during an introductory period. You will then have a higher, variable interest rate once the introductory period is over. Many low-interest cards don’t charge an annual fee.

Some international banks, such as Citibank or Barclays, may issue a U.S. credit card for clients moving to the U.S. There are innovators working in this space, like Nova Credit, that allows some immigrants to transfer their credit history from their previous country of residence, so American lenders, property rental companies and others can review it.

Nova Credit works with the top global consumer credit bureaus in countries like Mexico, India, Australia, the United Kingdom and others.

Here are some steps to follow if you’re going to try to bring over your credit history from another country:

If you are turned down for a credit card on your own, you may have better luck if you ask someone you trust to co-sign with you. This is a better option than asking to be added as an "authorized user" on someone's existing card account, since not all credit card issuers report authorized users to the credit bureaus.

There are also different formulas used to calculate credit scores, and the track record of authorized users doesn’t always fare well.

There are also some potential risks to be aware of:

There are other options besides using a credit card to establish credit as a foreigner or immigrant. Investigating whether these may benefit you in the long run, as they offer useful alternatives to accessing a greater array of financial services and products.

Once you’ve begun establishing credit, you need to make sure you protect your score and regularly monitor it to see how you are doing. It’s a good idea to continue to improve your score as you progress. The better your score, the better access you’ll have to loans and lower interest rates.

Here are eight tips to help you monitor and build your credit:

There are many resources, from nonprofits to government programs, available to help immigrants build credit reports and improve credit scores.

• Immigrant Finance: This online platform empowers immigrant families with personal finance education, online business development and community support. You’ll find tons of resources here and on their podcast.
• The Consumer Financial Protection Bureau: This government agency has audio files of its publications on credit, including How to Rebuild Your Credit, in Chinese, Vietnamese, Korean, Tagalog, Russian, Haitian Creole, Spanish and English. It also has a useful newcomer’s guide to managing money.
• UnidosUS: This Latino civil rights and advocacy organization serves the Hispanic community through its research, policy analysis, and state and national advocacy efforts, so you’ll find plenty of materials on its website tailored to help Latino immigrants.
• Credit Builders Alliance (CBA): CBA is a network of nonprofit organizations, many of which serve immigrants. Their nonprofit lender members have experience in lending money to those who are credit invisible, making this site useful for those who have no credit history at all.
• The Mission Asset Fund (MAF): This nonprofit aims to create a fair financial marketplace for families in need and offers assistance in many ways, including loan programs that help you build your credit.
• Immigrants Rising: Immigrants will find numerous resources on this site for building credit individually or as a business.
• Urban Institute: This research organization provides many news stories about the latest credit information and issues that affect immigrants.