Your credit history is a measure of your ability to repay debts and demonstrated responsibility in repaying them. It is recorded in your credit report, which details the number, types and activity on your credit accounts. This helps lenders see whether you are likely to pay your debts on time and if you have any risky financial habits that could threaten your credit score.
Having a good credit score is an essential part of living a comfortable life in the U.S. Important financial investments including rent, buying a car, applying for loans – and in some cases, even getting the job you want, depends on building a good credit history. A common problem non-residents face is that as their credit history is bound by geography, the progress you made in your home country means nothing once you cross international borders.
Immigrants entering the U.S. must build their credit score from scratch. Whether you’re hoping for an F-1 visa extension, securing a green card or even saving on your international student loan, building a credit score is an important aspect of maintaining good financial health in the U.S.
Let’s take a look at the importance of having a good credit history.
- Lower interest rates: You will be eligible for getting loans and credit cards at a lower interest rate, along with other perks such as discounts on processing fees and increased loan amounts.
- Improved approval rates: Credit scores can be a deciding factor in being approved for loans and credit cards. A good credit rating shows that you are low-risk and you are more likely to be approved easily.
- Better offers and rewards: A good credit history gives you access to great rewards and offers on credit cards, such as cashbacks, travel points, discounts and other benefits that can come handy while on a budget.
- Pre-approved loans: With a good credit score, you will be eligible for pre-approved loans that can only be provided by banks to their existing customers.
However, we do understand that it requires having some initial knowledge and finances to begin your credit journey in a new country. Here are a few pointers that could help.
- Open a bank account: Opening a bank account will demonstrate a history of financial performance with each bank and thus any established relationships with banks will open the possibility of credit in the future.
- Report your rent: In the US, rent isn’t automatically reported on your credit report because the information isn’t directly handled by credit bureaus. However, you can now register with Experian and make an arrangement with your landlord to make your housing costs count towards your credit score.
- Apply for credit cards: The best option while looking at credit card for students with no credit history is to go for a secured credit card without collateral, or in some rare cases, an unsecured credit card with a co-signer. Your monthly activity is reported to the credit bureaus and making consistent payments will allow you to prove that you are a trustworthy borrower opening you up to the full spectrum of financial benefits once you become eligible for traditional credit cards.
- Try a credit-builder loan: Credit-builder loans work great for credit reporting purposes and thus, in building credit. Consider them as a rigid savings plan where you make deposits every month and receive your deposited amount back with an interest while reporting these payments to build your credit profile.
Note that irresponsible use, such as late payments, can make you a defaulter and impact your score negatively. Building your credit score is a gradual process, but the easiest way to start building your profile is by applying for a credit card and ensuring to clear balances in a timely manner.
Neobanks like Zolve.com have made it extremely easy for immigrants and international students to apply for credit cards without a credit history. They come with a high credit limit, offer great rewards and are accepted globally. With a low APR and easy to access services, these new age banking solutions can provide you with the financial freedom and an opportunity to build your credit score while you are a student.