Moving to the U.S. can cause culture shock for some, and the country’s credit system can make it difficult for you to start your life here. If you don’t have a credit history, it can be hard to get an apartment or even some jobs. And for the most part, forget about getting a loan.
But while building a credit history as an immigrant or international student isn’t easy, it’s not entirely impossible. Here are some tips on how you can do it and some credit habits to develop along the way.
How to build a credit history as an immigrant or international student
“When immigrants and international students arrive in the U.S., they are caught in a Catch-22,” says Kalpesh Kapadia, CEO of Deserve, a credit card issuer that uses alternative data in its underwriting.
They don’t qualify for credit because they lack a credit history, but to build credit history they need to get credit.”
He explains, “They don’t qualify for credit because they lack a credit history, but to build credit history they need to get credit.”
Not having a Social Security number makes it hard to get approved for a loan, but some of the top credit card issuers will accept an individual taxpayer identification number (ITIN) or passport instead. But even then, not having a credit history still counts against you.
Overview of the top 10 credit card issuers’ requirements
Some credit cards are better for immigrants and international students than others. Here’s a list of the major credit card issuers and what they require.
In addition to an SSN, ITIN, or passport, you’ll also typically need a job, a permanent address in the U.S., and a bank account.
And in most cases, you may need enough cash to put down a deposit on a secured credit card. Depending on your situation, though, you may have access to other options.
Secured credit cards
While most credit cards are designed for people with established credit histories, secured credit cards are easier to get if you have no credit history at all.
They require a security deposit — as little as $200 and usually equal to your credit limit — which you’ll typically get back when you close the account. Otherwise, secured cards function the same as conventional credit cards.
Just keep in mind that you’re limited by the issuer’s requirements. So, for example, you can’t apply for the Discover it Secured card because Discover doesn’t accept ITINs or passports.
Student credit cards
One way to build a credit history as an international student is to apply for a student credit card. Like secured credit cards, these cards are designed for folks with no credit.
But again, you can’t just get any student credit card. It has to be from an issuer that accepts alternate forms of identification.
Also, student credit cards typically require a decent income. So, if you’re not authorized to work in the U.S. yet and don’t have earned income, it could be hard to get approved.
Deserve credit cards
To help resolve the dilemma that immigrants and international students find themselves in, Deserve offers an alternative to secured and student credit cards. Deserve’s credit cards are all unsecured, so there’s no need for a security deposit.
And you’re not required to have a credit score to get approved. In fact, the issuer looks at other factors to determine whether to approve your application.
Deserve Edu, which is designed for college students, doesn’t require a Social Security number. Just have your passport and student visa on hand to share.”
“To determine creditworthiness, Deserve measures consumer attributes such as education, current financial health, and future employability instead of just looking at FICO scores,” says Kapadia.
What’s more, the Deserve Edu, which is designed for college students, doesn’t require a Social Security number. Just have your passport and student visa on hand to share.
3 tips for building a credit history as an immigrant or international student
Once you get a good credit card, here’s a quick summary of some of the best ways to build your credit history.
1. Make payments on time and in full every month
Your payment history is the most important aspect of your credit score, so it’s important that you make your payments on time each month.
Set up automatic payments on your credit card account to ensure you never miss one. Also, never spend more on the card than you can pay off in a month, and pay your balance in full to avoid interest charges.
2. Keep your balance low
A high balance on your credit card can signal that you have a hard time managing your debt. Unfortunately, this is even the case if you have a small credit limit.
Try to use less than 30% of your credit limit — so, if you have a $500 limit, keep your balance below $150 — to avoid hurting your credit score.
3. Avoid applying for another card too soon
Another factor that affects your credit score is what’s called a hard inquiry. Every time you apply for credit, the lender does a hard inquiry on your credit report.
While it doesn’t hugely impact your credit score directly, lenders can view it as too much too soon. So, it may be worth being patient for a while to build your credit with the card you have.
The bottom line
As an immigrant or international student, building a credit history is no cake walk. But it is possible through some of the tools credit card issuers offer.
Then, focus on establishing good credit habits, so that you’ll have a better chance of getting approved for loans, apartment leases, and jobs in the future.
Ben Luthi is a personal finance writer and a credit cards expert who loves helping consumers and business owners make better financial decisions. His work has been featured in Time, MarketWatch, Yahoo! Finance, U.S. News & World Report, CNBC, Success Magazine, USA Today, The Huffington Post and many more.