In the United States, credit scores summarize an individual’s payment history regarding debt and paying bills. In addition to helping someone access credit or get a low interest rate, credit checks are also a requirement for many job and apartment rental applications in the United States. Credit scores also impact the cost of car insurance, as well as loan terms and deposit requirements for utilities.
Newcomers to the United States generally must create a credit profile from scratch, as credit histories from other countries cannot be transferred. Students, however, can use their years of study to build a credit profile, positioning themselves well for life after graduation. We’ve compiled some tips to help you understand the American credit system and how newcomers can prepare for financial success in America.
First of all, you don’t need a social security number (SSN) to have a credit score. Credit history is tracked by name and address, although combining these fields with a date of birth and SSN makes it easier to identify a specific person. Don’t wait until you have an SSN to start building your credit history. Also, be sure to keep your address up to date on all financial accounts so your credit history stays up to date.
If you already have a good credit history in another country, consider working with a partner like Nova Credit, which allows Indians to qualify for credit products in the United States with their CIBIL score. Nova Credit translates international credit data from various countries into an equivalent US score that newcomers can share with select businesses when applying for US credit products.
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Newcomers should establish a relationship with a US bank and obtain a credit card as soon as possible. A person with no credit history will likely only be eligible for a secured credit card, which requires a refundable security deposit and has a credit limit based on the amount deposited. The security deposit reduces the risk for the lender, making it easier to get approval. This is one of the most common steps to enter the American credit system. For students, your university probably has bank branches nearby that are used to working with Indian nationals.
If you are lucky enough to have someone in the United States to act as a co-signer, ask them to co-sign a credit card application. A co-signer with a good credit rating greatly increases the chances of approval because the co-signer guarantees that they are ultimately responsible for your debts. This is extremely beneficial when applying for your first credit card/loan or trying to rebuild a bad credit history.
Be diligent about making your payments on time, or better yet, sign up for automatic payments. In any country, timely credit payments are key to building a strong credit rating. Signing up for automatic payments ensures this by making you immune to forgetting. Responsible use of credit is also important; a good rule of thumb is to keep credit card balances below half the credit limit.
For students looking for funding, consider getting a loan from a US-based lender like MPOWER Funding. MPOWER lends to promising international students without requiring collateral, co-signers, or credit history in the United States. Global lenders like MPOWER are the easiest route to establishing a US credit history, as all payments will be reported to a US credit bureau.
Graduates can also refinance foreign loans with MPOWER Financing. Refinancing is the practice of paying off an old loan with a new loan that offers a better interest rate, lower payments and/or other better terms. Refinancing a foreign loan through a provider like MPOWER can help newcomers establish a credit history in the US and unlock access to the broader US financial ecosystem.
A strong credit history is very important and can help individuals save many thousands of dollars throughout their lifetime. Good credit leads to financial inclusion: qualifying for better rates on loans, setting up utilities, renting an apartment or a car, and getting certain jobs. With the toolkit above, newcomers to the United States can set themselves up for financial success.