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You likely won't have a credit report or score if you're new to the U.S.—even if you had credit before moving. Credit from other countries won't transfer to the U.S. credit system, so you'll be building a new credit profile from the ground up after you arrive. Credit could also be more important in the United States than in your home country, so it's something you'll need to start thinking about pretty quickly.
Here's a quick look at how the U.S. credit system works and suggestions for how you can establish and build credit if you're new to the country.
How Credit Works in the U.S.
Credit can influence many aspects of life in the United States. Your credit history and scores can impact your eligibility if you want to take out a loan or open a credit card, along with the fees and interest you'll pay.
Additionally, your credit (or lack thereof) can impact many non-lending decisions. These can include your ability to rent a home, get a job or promotion, how much you pay for insurance and whether you need to pay a deposit to open a new utility account.
There are several key components to the credit system in the United States:
- Consumer credit bureaus maintain records on consumers' experience with credit accounts. The three major consumer credit bureaus are Experian, TransUnion and Equifax, and they all create consumer credit reports. Credit reports are primarily built on data the credit bureaus receive from other companies, usually lenders, and your credit reports may differ depending on whether the company sends information to one, two or all three credit bureaus.
- Credit scoring companies such as FICO and VantageScore® create scoring models that use the information in your credit report to calculate a credit score. Most credit scores range from 300 to 850, with higher scores meaning a lower risk in the eyes of potential lenders because it shows that you've managed credit responsibly in the past. Organizations use credit scores to quickly evaluate a person's creditworthiness. Many major financial institutions also create custom scores for their potential and current customers.
- Creditors, including lenders and credit card issuers, use credit reports and scores to help them make decisions about whether to offer someone a credit card or approve a loan application. If you don't have a credit report or you have a low credit score, it can be more difficult and expensive to take out a loan or open a credit card.
Unfortunately, even if you had credit in your home country, you may need to start over in the U.S. There are several ways to do this, including opening certain types of accounts that Americans often use to first build their credit.
8 Ways to Start Building Credit in the U.S.
Here are actions that you may be able to take to establish and build credit once you arrive in the U.S.
1. Become an Authorized User on Someone Else's Credit Card
If you have a friend or relative in the U.S. who has a credit card, they may be able to add you as an authorized user on their account. Once you're an authorized user, the credit card issuer might report the account to the credit bureaus under your name. Ask before getting added because some issuers might not report authorized users.
You may also receive a card that's tied to the account that you can use to make purchases (if the primary cardholder agrees), but you don't have to use it to build credit. Your credit report will reflect how the primary cardholder manages the account, so make sure they always pay their bill on time and maintain a low balance.
2. Open a Secured Credit Card
Another option is to open a credit card on your own. Certain cards may be difficult to qualify for if you don't yet have a credit history, but you may still have options. With a secured credit card, for example, you'll send the card issuer a refundable security deposit. You may send them $200 to get a card with a $200 credit limit, for instance. You still need to make monthly payments on time to avoid hurting your credit, but the deposit limits the card issuer's risk, which is why it's easier to get approved for secured cards.
3. Consider a Credit-Builder Loan
Lenders offer credit-builder loans specifically to help people build credit. Once you're approved for the loan, the money may be set aside in a locked savings account. You then repay the loan with interest, and the lender reports your payments to the credit bureaus. When you're done repaying the loan, the savings account gets unlocked, and you'll have access to the funds. Make sure your lender reports your payment activity to all three credit bureaus.
4. Use a Lending Circle
Another option is to get a no-interest loan through a community organization's lending circle. Each month, all the members make a loan payment, one member receives the full loan amount and the organization reports the loan activity to the credit bureaus. Mission Asset Fund, a nonprofit organization, facilitates lending circles and has a database you can use to search for additional options in your area.
5. Look for Accounts That Use Alternative Underwriting Methods
Some lenders and credit card issuers approve new accounts based on information that doesn't come from the credit bureaus. For example, with certain cards, you may be able to connect your checking account and get approved based on your banking history. (You will need to be a legal permanent U.S. resident and have a U.S. phone number and email address.) These may be good options once you establish bank accounts in the U.S.
6. Try to Use Credit From Your Home Country
In some cases, you can use credit from your home country to quickly get credit in the U.S. International banks and credit card issuers, including American Express, BNP Paribas and HSBC have programs for customers moving to the U.S. If you have an established relationship with an international financial institution, see if it has any recommendations or options. Also look into Nova Credit, a U.S. company that helps people use their established credit from select countries to qualify for U.S. credit cards, loans and housing.
7. Ask Your Employer and Local Community Banks and Credit Unions
Large employers may partner with financial institutions to help their foreign workers get access to banking and credit services. Ask your human resources department if any such resources exist. Also, ask local community organizations and fellow immigrants about community banks or credit unions that may have special programs.
8. Add More Accounts to Your Credit Reports
Some types of payments don't commonly get reported to the credit bureaus, including rent. However, you may be able to sign up for a rent reporting service and use your rent payments to establish or build your credit. You can also use the free Experian Boost®ø tool to connect your bank account and add your utility, telephone and popular streaming service bill payments to your Experian credit report.
Build Positive Credit
After establishing credit in the U.S., you'll want to focus on building a positive credit history. Doing so can help you qualify for more, better and lower-cost financial products.
Building good credit can take time, partially because the age of your credit history is a scoring factor. But here are a few simple practices you can follow:
- Pay your bills on time. If possible, pay all your bills on time. If you miss a payment, try to bring your account current within 30 days. Falling 30 or more days behind can lead to a late payment in your credit history, which will hurt your credit scores.
- Don't use all your available credit. If you have a credit card, using a small portion of your account's credit limit is best for your credit scores. Only using small amounts can also make it easier to pay your bill in full, which will help you avoid paying interest.
- Apply for credit sparingly. You may want to open a few accounts when you're first building credit. But once you're established, limiting how many applications you submit can help you maintain a good score.
The Experian blog is filled with articles on credit reporting and credit scores. Continue learning about the intricacies of credit and how specific actions may help or hurt your credit.
Check and Monitor Your Credit
You can also monitor your Experian credit report for free. The program sends you real-time alerts, helping you stay on top of your credit and respond if there's any suspicious activity. You'll also get explanations about the different factors that are impacting your unique credit history and suggestions for how you can improve your credit.