What’s all this talk about Credit?
There are so many things to think about when getting ready to move to the United States: where to live, how to get there, making friends and what you’ll need to buy. Have you thought about how you will get a local cell phone or open up a U.S. bank account? These are just a couple of things that require you to have credit.
When you’re planning a move to the US, learning about the credit system can eat away at the excitement of your amazing journey. We get it: it’s a boring and confusing topic. While learning how to get credit, you may experience the following side effects: anger, fear, hope, and calm. If it makes you feel better, even many individuals living in the States themselves are still confused about their own system.
What is Credit?
Credit in simplest terms is your ability to use borrowed funds or to access resources to secure a good or service. I know, still a bit wordy. At its core, credit is about trust. It allows you to rent an apartment, get credit cards, and purchase a mobile phone by showing that you’ve borrowed before and paid it back consistently.
A Credit Score (also known as FICO or VantageScore) is a score on your trustworthiness to repay borrowed money. The score ranges from 300 on the low end to 850 at the high end. Anything over 700 qualifies as good credit and a score of more than 750 is considered great. But don’t worry too much about this number, it can take time to build and I know many people with sub-700 scores who used prepaid accounts and co-signers on leases to show credit worthiness. Experian has a good article on ways to improve a bad credit score.
The tricky part is that in order to build credit you sometimes need to prove you have credit, but credit from one country does NOT follow you to a new country. Each country evaluates credit differently making it difficult to take with you. It’s very important to remember this! Therefore, before you move, be prepared and make sure you have all the necessary documents that will allow you to bypass having credit.
A few key points:
- When you apply for a for visas the US Department of Homeland Security can use your financial history to further evaluate you.
- It’s estimated that after you get a credit card or loan, it takes about 6 months of fulfilled payments for your credit history to start showing: https://www.movebayarea.com/single-post/2017/02/07/Expats-Why-You-Need-to-Create-US-Credit-History-Fast-Because-You-Need-It
How to Build Credit:
Good ways to start building credit are with credit cards, mobile phone payments, renting an apartment and even leasing or making payments on a vehicle. The catch is that these can be difficult without established credit. Many times, you will be asked for a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN).
If you didn’t receive an SSN from the Department of Homeland of Security, apply for an ITIN here: https://www.irs.gov/individuals/individual-taxpayer-identification-number-itin
Individual Taxpayer Identification Number, a tax-processing ID number assigned to individuals by the Internal Revenue Service.
Depending on the bank or credit card company, you can sometimes use an ITIN instead of a Social Security number when applying for a credit card. There are a few easy ways to apply for an ITIN.
- By mail.
- Through an IRS-authorized certified acceptance agent in the U.S. or abroad.
- At a designated IRS taxpayer assistance center.
After applying, sit tight. You should hear back from the IRS within seven weeks if you qualify and your application is complete.“ – Credit Karma
Let’s walk through a few of these to simplify the process.
Getting a Bank Account:
If you are relocating to the US with a job, then simply ask your employer for a letter of employment verification and income. This will allow you to open up a bank account. Citibank is just one example where you can do this.
If you don’t have a job, then you will need an SSN or ITIN. There are a few expat friendly banks that don’t require an SSN: Bank of America, Bank of the West, and Capitol One. Giving a local branch a call or visit is always a good place to start.
Getting a Mobile Phone:
One quick and easy way to get a mobile phone without credit is by using prepaid cards and prepaid contracts. This will allow you to start establishing yourself. You will just need to have the funds available upfront instead of on “credit.”
Without an SSN, you may be able to lock down a mobile phone by paying an extra security deposit and showing your employment status and bank account.
Getting a Credit Card:
- If you have a credit card already, call and see if they can issue you a US version
- Secure a debit card through your financial institution.
- Ask your bank for a secure credit card. This is where you give them $500 and in return, they will give you $500 worth of credit. This will allow you to start making purchases using the card and building trust but by using your own money instead of the banks.
A few other tips:
- If you need a vehicle, check out the expat-friendly site International Auto Source. They might be able to help you secure a loan on a car.
- Consider looking into Experian (a credit reporting company) to help get your rent reported to RentBureau. This will allow you to start building credit history every time you pay rent.
- Ask your landlord if they would consider taking rent payments through sites like Cozy or RentTrack. This will allow you to use your rent to start building credit history. Check out Experian for a good article detailing this.
By following this guide your transition from home to the United States will be a smoother one.