How to Build Your Credit Score as a New Immigrant in the US

How to Build Your Credit Score as a New Immigrant in the US

Building a good life in the United States as a new immigrant requires having a good credit score. This is because your credit score impacts everything you’ll ever do. From renting an apartment, securing a loan, purchasing a car and so much more. Having a good credit score means easier loan approvals, more housing options and even better interest rates. 

As a new immigrant, the time to build a credit score is as soon as you move into the country. This post will provide a comprehensive guide to help you establish and improve your credit score in the US.

What is a Credit Score?

A credit score is a number that represents your creditworthiness based on your borrowing and repayment history. There are institutions known as credit bureaus that track your credit information and generate a credit report associated with your score. 

The major three credit bureaus are Equifax, Experian and TransUnion. So anytime you need to access a loan, mortgage, housing, or lease, a credit check is made and a report is generated from either one of these companies.

Want to see how it works yourself? Download the app and create an account for free here.

Five Ways to Build Your Credit History and Score in the US

To start building your credit score from scratch as a new immigrant in the US, here’s what you need to do;

Apply for a Social Security Number (SSN) or ITIN.

A social security number is a unique 9-digit number assigned to every US citizen, permanent or temporary US resident. The credit bureaus that track your credit information, usually generate the report based on your SSN. This is why it's important to apply for one. You can do this through the Social Security Administration website. 

In some cases, as a new immigrant in the US, you might be ineligible for an SSN. So rather than waiting, we recommend obtaining an ITIN which is an Individual Taxpayer Identification Number. This number also allows you to file tax returns and build a credit history until you’re eligible for an SSN.

Open a US Bank Account.

Having a US bank account shows responsible financial management. For one, you have to make purchases, receive payments from your employers or get a debit card for everyday purchases. So open a traditional bank account - preferably a checking or savings account to establish a positive banking relationship. We also recommend having an additional bank account especially if you’ll be receiving and sending money abroad.

Since traditional banks take longer processing times and charge higher for international money transfers, having a bank account like OhentPay, gives you more flexibility. You can make transactions in over 190 countries and and in 30+ different currencies as you want without visiting a branch or waiting for processing times. 

Start Building Credit with Secured Credit Cards.

Once you’ve sorted out the first two steps, apply for a credit card. A credit card allows you to borrow money from the bank for up to a certain limit. The limit is known as your credit limit. Now you don’t have to pay back immediately as you’ll get a monthly statement showing all the purchases you’ve made and the amount due. Pay the amount in full before the due date and you won’t have to pay any interest.

 If you can’t pay in full, you get charged interest which can spiral especially since they are very high. So apply for cards with low annual fees. Using your credit card responsibly can help you build your credit score very fast. However, using it irresponsibly will negatively impact your score. 

Pay Your Bills on Time.

Your repayment history is the most significant factor impacting your credit. In fact, it accounts for about 35% of your score. So always pay your pending or monthly bills on the due date or before. This includes your rent, utilities, phone bills and others. Keep in mind that certain landlords or third-party services like phone companies report your payment reliability. So it can either positively or negatively impact your score depending on what side of the coin you’re on.

Consider Installment Loans.

When you make fixed monthly payments towards a specific amount, it builds positive credit behaviour. This is why having instalment payments towards a purchase can help you build positive credit behaviour/score. So if you’re purchasing a new phone, a new item in your home or for work, consider making them in instalment payments. 

Want to see how it works yourself? Download the app and create an account for free here.

Other Tips for Building Your Credit in the US as a New Immigrant

  • If a close family member with good credit adds you as an authorised user on their card, it will reflect on your credit report.
  • Do not apply for many credit cards or loans within a short period. Only apply for what you need and be sure to space it out
  • Never max out your credit cards. A good point is anything below 30% of your credit limit.
  • Review your credit report regularly and dispute errors if you get any
  • Be careful with the lenders you use. Review their interested rates and look out for any hidden fees
  • Again, only apply for loans you can pay back.

Wrapping Up.

Remember, building a strong credit score takes time and consistent effort. So take your time by following these steps and adopting responsible financial habits. Within a few months, you’ll see tremendous improvements in your credit score and you'll be well on your way to achieving your financial goals in the US.

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.

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