In many ways, our credit determines our power as consumers. The strength of our credit profile and score enable us to rent an apartment, take out a car loan, and sign up for a cell phone number. Can you imagine moving to another country, and having little to no credit history?
That’s exactly what those who are new-to-country face in the U.S. Even those who had excellent credit in another country have their credit history scraped upon moving to the States, forcing them to start from square one.
The number of people who are foreign-born in the U.S. has reached its highest since 1910. And according to the Migration Policy Institute (MPI), there are over 44 million immigrants living in the U.S., or 13.7 percent of the population. The foreign-born population is anticipated to continue to grow.
Here are some ways recent immigrants can build their credit or gain access to any existing credit files in the U.S.:
Obtain an International Credit Profile
What if your credit score wasn’t erased when you move to another country? International credit profiles can help those new-to-country transport existing credit histories to the U.S. Similar to a credit report you’d get from one of the credit bureaus, an international credit profile includes one’s personal info, repayment history, employment history, inquiry history, and their U.S. equivalent credit score.
Consumer reporting agencies such as Nova Credit have joined forces with credit bureaus in Australia, Mexico, India, and the U.K. to offer foreign-born newcomers a global credit passport. Nova Credit is currently working on more partnerships to include credit agencies from additional countries. Hopefully an international credit profile will be a standard practice.
Join a Non-Profit Lending Circle
Non-profit organizations such as Mission Asset Fund (MAF) allow you to build credit by joining what’s called a lending circle. These lending circles are made up of 6 to 12 people, and the loan amounts range from $300 to $2,400. Each month, a member of the circle receives a loan until everyone in the group gets their turn. Monthly payments range from $50 to $200.
MAF reports your activity to all three major consumer credit bureaus — Experian, TransUnion, and Equifax — and in turn you build credit. The goal? To empower communities that lack access to credit and other financial resources. You gain access to credit you need, and help others gain access in the process.
Have Your Rent Reported to the Credit Agencies
Renting an apartment with no or very little credit is a tough matter. You might be asked for a co-signer, additional documents, a fatter deposit, or additional months’ rent to land a place.
While it’s not standard for your landlord or property manager to report your rent payments to credit agencies, see if this is something they can do once you get a place to rent. It doesn’t hurt to ask. Making on-time rent payments that show up on your credit report can help you build your credit history. Be aware that you can’t self-report your rent history to the agencies; only your landlord can.
Get a Credit Card
Getting a credit card is tricky if you have a thin credit file — or no credit at all. While you typically need a Social Security Number, that’s only available to foreign-born with a work visa.
If you aren’t able to obtain an SSN, don’t despair. Some major credit card companies allow you to apply for a credit card with an Individual Taxpayer Identification Number (ITIN), or your taxpayer ID. However, getting approved might still be tricky with a thin credit file, and you might need to provide proof of employment, a permanent residence, or a bank account. Your options might be limited.
Obtain a Secured Card
A secured credit card, while technically a credit card, has some features that resemble a debit card. You have to make a deposit on the card. Your line of credit typically equals the amount of your deposit. So if you put down a $250 deposit, your credit limit will also be $250.
Besides that, a secured card works just like any other credit card. Your balances can carry over from month to month and you’ll be charged interest on the outstanding balance. Your activity will also be reported to the credit agencies. Note that some secured cards have an annual fee, and the APR might be higher than unsecured cards.
Have Someone Co-Sign a Card
If you’re having trouble getting approved for a credit card, consider getting a co-signer for your card A co-signer is someone who has good credit. Should you have problems making payments, the co-signer ensures to the credit card company that the balance on the card will be paid.
When you have a co-signer, you and the other person are considered joint account holders. In turn, you’re both responsible for the balance of the card. Before a good friend or family member agrees to co-sign a credit card with you, understand the financial implications.
Apply for a Credit Builder Loan
Here’s how a credit building loan works: The money you borrow is put into a bank account. You make monthly payments until the loan is paid off. Once the loan is paid off, you receive the money that’s held in the account. Your repayment activity shows up on your credit file.
Because lenders aren’t taking the risk of not getting paid back, these loans are offered to those with poor credit or no credit whatsoever.
No matter how you’ll go about building your credit, always keep in mind best practices for working toward a sterling score: don’t bite off more than you can chew in terms of financing, and never miss or make late payments. If you’re looking into a credit card, pay off the balance in full each month if you can.
While new-to-country residents of America face a set of financial challenges, there are ways to build credit, or even have access to your credit score from another country. As the foreign-born population continues to grow in the U.S., let’s hope there are greater resources and ways for them to overcome these barriers.