How to Get A Good Credit Score If You’re an Immigrant

Table of contents:

• What Is a Credit Score?
• What’s a Good Credit Score?
• Why It’s Essential to Build a Healthy Score
• 4 Options to Start Building a Credit Score from Scratch for Immigrants
• Additional Tips on How to Get a Good Credit Score
• How IPSIPay Helps Immigrants and Other Underbanked Groups

Newly arrived foreigners commonly cannot get low-interest loans, not to mention favorable mortgage conditions. The reason is that they have no credit score. Therefore, most lenders consider them unreliable borrowers. 

But don’t worry – there are easy ways to get credit cards with no credit history and start building a credit score. Read on for reliable credit score improvement tips.

What Is a Credit Score?

A credit score is a calculated index predicting how likely an individual is to pay off loans on time. Three credit bureaus in the USA collect borrower data: Equifax, Experian, and Transunion. The data reported to bureaus contain individuals’ payment histories. It reflects the total amount of debts you owe and how you settled them throughout the month. The credit reports include records on:

• Lines of credit (credit cards balances)
• Credit inquiries
• Consumer loans
• Medical bills, etc.

The bureaus usually track consumers’ data using an SSN. However, it’s not the only identifier credit bureaus can use to access your credit history. They still have an employment history, your name, and your actual address in the US that can lead them to your credit history.

What’s a Good Credit Score?

Financial institutions check this score before lending money to consumers. It’s to your advantage if your credit score is higher than average. The grade varies from 300 to 850, where: 

• a range between 670 and 739 is considered a good credit score. 
• Conversely, any value below 579 is a bad credit score.

Why It’s Essential to Build a Healthy Score

It’s crucial to decide how to build credit for the first time and continue to improve it, as it largely affects your well-being and access to financial services. If your score is low, the lender will likely reject your loan or line of credit application. Or they will offer you a loan with disadvantageous limits and high interests.

Improvement of your credit score also opens access to:

• Mortgages and car loans. You’ll have to qualify for a loan at some point to purchase property, a house, or a car. A robust credit score will guarantee your success on such occasions.
• Higher credit limits. The starter lever credit card for immigrants is typically limited to $200. But if you level up your credit score, you’ll be able to qualify for premium cards with higher limits.
• Beneficial insurance premium. Practically every type of insurance premium depends on how good your credit history is. Suppose insurers see that you manage your debts and settle bills on time. In that case, they consider you more responsible in other aspects of life. Consequently, they can offer you lower premiums.
• More housing options. Credit records are strong proof of your solvency. Every rental advisor would recommend you increase your credit score to meet the landlord’s approval.
• Advantageous utility services. It’s pretty hard to make a contract with utility providers with poor or no credit stories. On average such unsecured applicants can’t get service at low rates. Sometimes, utility companies can ask them to pay a security deposit.

Better employment options. Demanding employers may look into credit reports as a part of candidate background checks. Generally, they aren’t that picky about people with less-than-perfect credit. However, recurring late payments might discourage them.

4 Options to Start Building a Credit Score from Scratch for Immigrants

Here are four suggestions for building credit for the first time. However, you should notice that they work best for particular situations and aren’t universally applicable.

1. Get a Secured Credit Card for Immigrants

This option primarily appeals to non-residents without SSNs or ITINs. But they also are suitable for temporary residents and underbanked United States citizens. However, you must fund a security deposit to get such credit cards with no credit history.

Generally, the deposit amount equals the credit limit of a borrower. On average, the minimum balance for a secured credit card is $200. Some lenders might have specific terms of use, allowing you to get limits that exceed your initial deposit. 

Mostly, such types of card offerings are reliable and transparent. However, we advise you to clarify a few crucial moments before applying:

• How can you retrieve a security deposit?
• Does the provider reissue or upgrade the credit card to premium?
• Can you apply for a card if you’re unbanked and can’t fund a deposit from a bank account?
• Does the card issuer report to credit bureaus?

2. Get an International Student Credit Card

International student cards are pretty hard to get as most card issuers require an applicant to be an SSN owner. Moreover, financial institutions set distinct requirements for customers under and over 21.

If you’re under 21 and want to get such a credit card for immigrants, you must:

• Provide relevant proof of enrolment into the school.
• Collect co-signer information and proof of their income. 
• Submit an application and attach personal documents to it.

If you’re older than 21, you must provide documentation confirming your income and available assets. Typically, it doesn’t matter whether you work part-time or full-time. It is about proving to the card issuer that you have a steady income.

3. Become an Authorized User on Someone Else’s Card

Your family member or a partner could permit you to use their credit card. For such a case, you may order a separate credit card linked to this person’s balance. Yet, the primary cardholder still has to maintain a sufficient balance.

You must check this method’s efficiency to gain a credit score faster. Ask financial institution representatives whether the bank will report to bureaus your spending as an authorized user. If so, then your payments will be added to your credit file.

4. Request a US-Issued Card from Your Foreign Bank

If your initial bank has US branches, you can apply for a credit card at one of them. You can also do it if some of the family members are naturalized US citizens (meaning, born outside of the US with obtained US citizenship) and have a bank account in an international bank.

Such tactics work well for non-citizens who already have foreign credit cards from American Express. To apply for the US-issued card, you’ll need to confirm your US address and provide the necessary details on your foreign credit card account. You can even transfer existing reward points to your new card if approved. 

Additional Tips on How to Get a Good Credit Score

Well-considered spending and timely debt settlement are key to a healthy credit score. So how to build credit for the first time?

Do This:

• Maintain a credit utilization ratio between 0% and 30%. It means that if your available limit is $500, you must use no more than $150.
• Set an auto-pay for utilities and rent to avoid late payments.
• Monitor and control your credit card balance and score with an expense tracker app.

Don’t Do This:

Borrowers with permanently low credit scores make the same mistakes on and on. Their most common missteps are:

• Insufficient credit utilization ratio (CUR). It means people often withdraw credit funds and large amounts, about 50% of the current limit or more.
• Paying off bills and card maintenance fees past due. Timely settlement of any debt proves your payability to rating bureaus.
• Applying for new credit lines and cards too frequently. An additional request for the balance extension sooner than half a year hurts your score.

How IPSIPay Helps Immigrants and Other Underbanked Groups

The IPSIPay app offers simple-to-use 24/7 financial operations. It was designed for underbanked people to provide them with instant money transfers on the go. Apart from storing debit and credit cards for immigrants, the application offers various low-cost payment services.

Want to send and receive money from your relatives across the border? Join IPSIPay for free today! Visit Google Play or AppStore and download it to your smartphone.