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How to Establish Credit History as an Immigrant with No Credit

December 23, 2022

It doesn’t take much time living in the United States to see that credit scores are an important factor in American life. Your credit score measures how likely you are to pay back your debts on time, and it affects everything from renting an apartment to getting a loan for a car or even a house. 

Unfortunately, if you're new to the United States and have no credit history, it can be challenging to get approved for credit in the first place, which is needed to build credit — the ultimate catch-22 in the American financial system. That's why we created this guide with practical strategies and tips to help immigrants establish credit history from scratch.

Why Building Credit Is Important for Immigrants

Credit history is one of the factors considered by lenders, employers, and landlords to determine your financial responsibility. And while it might sound confusing, the way credit scores work is somewhat simple:

In the United States, the three major credit bureaus, TransUnion, Equifax, and Experian, collect and maintain your credit information. They use this information to calculate your credit score, which lenders use to determine your creditworthiness.

What Is the Fair Credit Reporting Act (FCRA)? | Lexington Law

But why is it important to establish your credit history in the first place? Simply put, the American Dream is pretty much inaccessible without a credit history (and a good one at that).

Access to Financial Opportunities

Having a good credit score opens up a world of financial opportunities. It allows you to access various financial products, including:

  • Credit cards
  • Personal loans
  • Mortgage Loans
  • Auto loans

These opportunities may be inaccessible without credit history, making it difficult to achieve your financial goals and live a prosperous life in the country.

Lower Interest Rates

A good credit score also means you're more likely to qualify for lower interest rates on loans and credit cards. This can save you thousands of dollars in interest over the lifetime of a loan. Lower interest rates can also mean lower monthly payments, making it easier to manage your finances.

Employment Opportunities

Believe it or not, your credit score can also affect your employment opportunities. Many employers now conduct credit checks when hiring, particularly for positions that involve handling money or managing finances.

Housing Opportunities

Having good credit can increase your chances of being approved for a rental property and may even lead to lower rental rates. That’s because landlords and property managers often conduct credit checks when considering rental applicants.

How to Start Building Your Credit History in the US

Are you ready to start building a financial foundation in the United States? You can quickly establish your credit history with the right tools and expert knowledge.

Get a Social Security Number (SSN)

If you’re eligible for one, it’s helpful to get a Social Security Number. Having no SSN is often a barrier for most immigrants trying to get credit cards or certain types of loans. Immigrants with an SSN will have a much easier time accessing these products.

An SSN is a nine-digit identification number issued by the US government that allows creditors to access your credit report and score. To get an SSN, you must complete an application with the Social Security Administration.

Social Security Number (SSN) | Bechtel International Center

The SSA notes that if you’re not an American citizen, “You need to prove your identity and work-authorized immigration status.” To prove your identity and work-authorized immigration status, you’re required to show your immigration documents and passport.

If you're an immigrant, you may already have an Individual Taxpayer Identification Number (ITIN), which you’ll need to pay taxes. While an ITIN can be useful, it won't help you build your credit history. Therefore, obtaining an SSN as soon as possible is crucial whenever you become eligible.

Apply for a Secured Credit Card

A secured credit card is an excellent tool for building credit, particularly if you have no or limited credit history. 

A secured credit card requires a refundable security deposit, typically equal to the card's credit limit (usually $200, but you can find some secured cards with lower initial deposits). This deposit protects the issuer if you can’t repay the debt. Because the issuer is at a lower risk, they're more likely to approve individuals without a credit history.

When using a secured credit card, it’s essential to make payments on time and keep balances low. For example, use it only to purchase gas or groceries and pay it off monthly.

Over time, this activity will reflect positively on your credit report and score. Eventually, responsible use of a secured credit card can lead to a better credit score and eligibility for an unsecured credit card.

Become an Authorized User

If you have a friend or family member with a good credit history, ask if they'd be willing to add you as an authorized user to their account. 

Being an authorized user means you'll have a credit card in your name, but the primary account holder is responsible for paying the balance. 

This arrangement can help you establish credit history and build a positive credit report as long as the primary account holder maintains a good payment history.

Establish Utility Accounts

Utility accounts like electricity and water bills may not appear on your credit report by default. Still, you can use them to establish your creditworthiness by signing up for a credit reporting service such as Experian Boost or RentTrack

These services allow you to link your utility and rent payments, which appear on your credit report. This way, even if you don’t qualify for a credit card or another credit account, consistently paying your utility bills on time can help build your credit history.

Get a Credit Builder Loan

There are many reputable credit builder loan companies like Cheese Credit Builder that enable individuals to build credit while also creating an emergency fund for future use

With Cheese Credit Builder, you can make your monthly payments towards a deposit account offered by the company. Once the loan term is completed, your on-time payments will be reported to all three credit bureaus: TransUnion, Equifax, and Experian.

How Long Does It Take to Build Credit in the US?

So, you’re following the tips above but aren’t seeing any movements in your credit score? That’s likely because building credit in the US takes time.

According to Capital One, one of the major credit card companies in the country, it takes up to six months of credit history to generate a credit score. However, that initial score may not be enough to qualify for certain credit cards or loans. 

Payment History: How It Affects Your Credit Score - And What NOT To Do

To build a strong credit profile, you'll need to consistently make on-time payments and maintain a low credit utilization rate, meaning you're not maxing out your credit cards. But beware, it's also easy to slip up and destroy your credit in no time.

Here’s a brief breakdown of how long it takes to recover after one “negative” financial mistake.

Ways to Improve Length of Credit History

It's essential to note that your credit score is calculated using several factors, but the length of your credit history is one of the most important. Credit agencies prefer a history of six months or longer to establish your creditworthiness and credit scores. 

Therefore, as an immigrant, you should focus on building credit immediately after you arrive in the US. As you build your credit history, here are some ways to improve your “length of credit history.”

Open a Credit Card Account

Opening a secured credit card account is one of the quickest ways to establish credit history. As mentioned, with a secured credit card, you’ll make a deposit. In most cases, this is about $200, and that becomes your credit limit. Gradually, as you use the card and make timely payments, you'll build your credit history and increase your credit limit.

Consider Becoming an Authorized User

Another option to improve your credit history length is by becoming an authorized user of someone else's credit card. It could be a family member or friend (there are no rules as long as you’re an adult). As an authorized user, any positive credit movements will also positively reflect on your credit report and boost your score.

Small Personal Loans or Installment Loans

Taking out small personal loans could also be an excellent way of building your credit history. Lenders who offer personal loans report your payment activities to credit bureaus and boost your credit score. These loans can extend from six months to a year and could provide a more extended credit history to launch your journey to good credit.

Avoid Closing Credit Accounts

Once you’ve opened a credit account in the United States, don’t close it unless you absolutely have to! Closing a credit account can negatively impact your credit score and your length of credit history. That’s because when you close a credit account, it reduces your overall available credit, which can increase your credit utilization ratio and affect your length of credit history.

Build Credit with Cheese Credit Builder

If none of the options above are available to you, consider a credit builder loan such as Cheese Credit Builder, which allows you to make monthly payments to a deposit account and have them reported to all three credit bureaus.

As an immigrant-founded company, Cheese understands the struggles immigrants face when building credit history. Our flexible repayment plans allow users to choose from various loan amounts and terms that best suit their financial situation. 

Making on-time payments through Cheese Credit Builder not only adds positive credit history to your record, but it also helps you save money and create emergency funds. Don’t wait any longer to start building credit — sign up now and build your financial future.

Cheese Credit Builder

Cheese helps you build credit and save money on autopilot.

- No Credit Check or Admin Fees
- Get a Custom Credit Builder Loan
- Build Your Credit and Save Money