I was listening to one of my favourite podcasts the other day. The host told a story about a middle-aged woman who fell on hard times. She asked around and was advised to get a credit card. She went to the right authorities to apply for a credit card but her application was rejected. Why? Well, she had a bad credit score. 

She had never owned a credit card and living in a small town, she didn’t know how important it was to build a good credit score. This case of ignorance can also happen to new immigrants. A good credit score is very important in countries like China, the U.K., Canada, Australia, Germany, and the Netherlands for tasks like renting an apartment, securing loans, and getting competitive interest rates. This guide will help you get started on building a good credit score as soon as you arrive, even as a new immigrant.

What Is A Credit Score And Why Is It Important?

A credit score(FICO score) is a three-digit number that measures your creditworthiness. FICO scores range between 300 and 850. The higher your score, the more likely you will get approved for loans and at better rates.

To calculate your credit score, you’ll need information from the number of accounts you own, total debt, repayment history, and other criteria. It’s a scorecard that lenders use to determine the probability that you will repay debts on time. 

The Importance of Building Credit As a New Immigrant

A good credit score can open many doors for you and make more things accessible to you. Here are some sweet benefits you get when you have a good credit score:

• You get cheaper interest rates: A good credit score results in cheaper interest rates on different types of loans. You also get to save some money while you service the loan. 
• Your credit cards will have higher limits: With a good credit score, you get to enjoy higher credit limits, bonuses and incentives and cheaper fees.
• Your chances of loan approvals will skyrocket: If you have a good credit score, your loan applications are more likely to be accepted and you will have access to cash when you need it. 
• Your insurance rates will be better: With good credit, the chances of getting lower premiums for vehicular insurance, etc will improve a lot.
• Landlords are more likely to approve your rental application and may even provide more favourable terms, such as cheaper security deposits if you have a strong credit history.

Challenges New Immigrants Face Without Good Credit Scores In A New Country

As a result of their lack of credit history, newcomers to a country frequently face problems financially when it comes to having a good credit score. Here are some of these major challenges:

• Having trouble getting loans and credit cards: If you don't have a good credit history, it would be difficult to get loans. Credit ratings are frequently used by landlords to gauge a prospective tenant's dependability as a rentpayer. If they don't score well, immigrants may encounter:
• Having trouble finding an apartment: Landlords may be reluctant to rent out their properties, which could result in a longer search and possibly higher rent expenses. In other cases, they might ask for higher deposits as a form of surety.
• Employment Opportunities: This is no longer common but some businesses do credit checks as part of the background checks before employment. Having a low credit score might mean that you're unable to manage your finances.
• Another thing that is rarely talked about is that not having a good credit score as a new immigrant can expose you to greedy loan sharks and predators with high interest rates. 

Practical Steps For Building Your Credit Score

Your credit score is like your financial passport. It shows at first glance, your financial identity. It might look challenging but you can start building a solid credit history as soon as possible. The following are practical steps to help you get started on building your credit score:

• Obtain an SSN or ITIN: First things first, you have to get a Social Security Number (SSN) if you're eligible. Obtaining this or an Individual Taxpayer Identification Number (ITIN) is the first step every new immigrant should take. These two are a huge help in having a financial identity. 
• Visit a bank and open a bank account: The next step is to walk into a reputable bank and open a savings and checking account to help establish a financial record for yourself.
• Apply for and get a secured credit card: These credit cards have to have a security deposit and this reduces risks for the lender. They are much easier to get than regular credit cards and can help you improve your credit if they are used carefully.
• Apply for store credit cards or small loans: Look for small, short-term loans from credit unions. Ask around for retailers who also provide store credit cards; these are easy to get and qualify for. 
• Use Credit-Building Tools: You can never go wrong with credit-building programs. These programs are like your advocates because they send back reports of your on-time rental or utility payments to bureaus.

Essential Tips to Improve Your Credit Score Over Time

• Pay your bills on time and avoid missing any deadlines.
• Try to keep the amount of credit you use very low; at least below 30%.
• Don’t make too many credit applications within a short period. Time and space out your credit applications.

Wrapping Up.

Starting afresh in a new country from scratch takes a lot of effort and dedication. Follow these strategies and maintain healthy financial habits. Before long, you'll unlock better financial opportunities in your new country.

If you’d like to send money anywhere in the world and prefer fast transfers at great rates, we recommend the OhentPay money transfer service. Create an account to get started here.

Share this post with a friend you think might need this.