When you, as an immigrant, come to America, there are many new things to understand and navigate. One of these is the American financial system, which is quite different from systems in other parts of the world. An essential component of this system is credit.
Your credit score impacts everything from the loans you can get to the apartments you can rent. However, building a credit history can be challenging when you are new to the country. Here are some practical steps to start building your credit as a new immigrant in America.
Securing a social security number or individual taxpayer identification number
First, you need a Social Security number or Individual Taxpayer Identification Number to build your credit. These are identifiers that the government and lenders use to track your credit history. If you do not qualify for an SSN, you can apply for an ITIN through the IRS.
Opening a U.S. bank account
Next, open a bank account in the U.S. This will not directly build your credit, but it is a vital step in establishing your financial footing. A bank account gives you a safe place to keep your money and is often necessary for securing credit-building products.
Applying for a secured credit card or credit-builder loan
A good way to start building your credit is by getting a secured credit card or a credit-builder loan. A deposit you make backs your secured credit card and your credit limit is usually the amount of that deposit. Meanwhile, a credit-builder loan holds the amount you borrow in a bank account while you make payments. Once you have fully repaid the loan, the money is yours.
Paying bills on time
Once you have credit in your name, make sure to pay all your bills on time. Timely payments are the most significant factor in your credit score. Even one late payment can have a negative impact.
Keeping credit utilization low
Try to use only a small portion of your available credit. A lower credit utilization rate can help your credit score. As a rule of thumb, aim to keep your credit utilization under 30%.
Building a good credit history as an immigrant in America might seem daunting, but by taking these steps, you can establish a solid credit foundation. Building credit takes time, but with consistency and discipline, you will be able to build a good credit history.