Credit Building for Immigrants: A Step-by-Step Guide

What Is Credit?

Your credit report and credit score reflect your history of managing debt. Three U.S. consumer credit bureaus—Experian, TransUnion and Equifax—maintain credit reports on individuals. Credit bureaus use credit reports to generate credit scores, which are numbers that reflect how risky you are as a borrower. Credit scores generally range from 300 to 850, with higher scores showing greater creditworthiness.

Lenders and other businesses may look at your credit report and credit score when you apply for a job, credit card, loan, apartment, auto insurance and more. They're checking to see whether you manage credit responsibly by repaying debts and paying bills on time.

Even if you had a good credit score in your home country, it usually won't carry over to the U.S. You typically need a U.S. credit report showing one to six months of payment history before your U.S. credit score can be calculated.

What Affects Your Credit Score?

Both FICO^® Score^Θ and VantageScore^® credit scoring models consider similar factors when determining your credit score. Here are the main factors affecting your FICO^® Score, the model used by 90% of top lenders:

1. Payment history is the biggest factor in your credit score, accounting for 35% of your FICO^® Score. Paying your bills on time benefits your credit; late payments, missed payments or accounts in collections can damage it.
2. Credit usage accounts for 30% of your FICO^® Score. This includes how many credit accounts you have with balances, your overall debt and how much of your available credit you're actually using.
3. Length of your credit history accounts for 15% of your FICO^® Score. Credit scoring models will consider the age of your oldest and newest credit accounts and the average age of all accounts.
4. Credit mix accounts for 10% of your FICO^® Score. Managing different types of credit accounts, including installment loans and revolving credit, can help benefit your credit score.
5. New credit activity accounts for 10% of your FICO^® Score. Whenever you open a new credit account, the lender will check your credit, which can temporarily cause your credit score to drop.

Your credit score can differ from one credit bureau to another. Each credit bureau may show different information in your credit report, may calculate your score at different times and may use different credit scoring models. Credit scoring companies FICO and VantageScore have developed dozens of different credit scoring models, and it's impossible to know which one a creditor will use. That said, building good credit generally will help all of your credit scores.

Learn more:

• What Is Credit?
• What Is a Credit Report?
• Credit Score Basics: Everything You Need to Know
• Credit Myths Debunked

Protect Yourself From Identity Theft

Identity theft is when someone steals your personal information and uses it without your permission. Criminals may steal your name, address, driver's license number, bank account number or other identifying information and use it to commit fraud. For example, they might apply for loans or credit cards in your name or access your financial accounts.

Identity theft can drain your bank account and damage the credit score you're working so hard to build. You can safeguard against identity theft by creating and protecting secure passwords, keeping your identification documents safe and avoiding public Wi-Fi networks.

Regularly monitoring your credit report and bank accounts for unfamiliar expenses or accounts can help you spot signs of identity theft early so you can take action. You can check your credit report for free with Experian or through AnnualCreditReport.com.

How to Start Building Credit

Follow these steps to get started building a U.S. credit history.

1. Get a Social Security Number or Individual Taxpayer Identification Number

If you're not a U.S. citizen, you typically must be authorized to work in the U.S. by the Department of Homeland Security (DHS) or be attending school to get a Social Security number (SSN). It's free to apply, and you can start the process online.

• Social Security Numbers for Noncitizens
• Request a Social Security Number

If you aren't eligible for an SSN, you may qualify for an Individual Taxpayer Identification Number (ITIN). Resident aliens, nonresident aliens or their spouses or dependents can apply for an ITIN.

• Apply for an ITIN

2. Open a Bank Account

You can usually open a U.S. bank account as a noncitizen if you have the required identification. This may include an ITIN or SSN, a U.S. state or local ID, a consular ID or your passport. Credit unions are member-owned financial institutions that offer most of the same services as banks but tend to be more community-focused.

• Visit Bank On to find banks and credit unions that are working to improve access to credit for immigrants.
• Visit Junto Avanzamos to find credit unions offering services for Spanish-speaking individuals regardless of immigration status.
• Find banks and credit unions that focus on serving minority and low-income populations.

Learn more:

• Can Non-U.S. Citizens Open a Bank Account in the U.S.?
• What Documents Do I Need to Open a Bank Account?
• How to Open a Checking Account
• How to Open a Savings Account
• What Is a Credit Union?

3. Get a Credit Card

Using a credit card responsibly by making your payments on time and paying off your balance each month can help you build a positive U.S. credit history. You typically need an SSN to apply for a credit card. However, some credit card issuers, including Zolve, Petal and Neu, accept an ITIN or other forms of identification, such as your passport or student visa. Nova Credit allows immigrants from certain countries to use their credit history from their home country when applying for American Express credit cards.

Secured credit cards, which require a refundable security deposit to open your account, can be a good option for immigrants. Secured cards are designed for people with limited or no credit history.

Learn more:

• What Is a Secured Credit Card?
• How to Get a Secured Credit Card
• How to Apply for a Credit Card Without a Social Security Number
• What Is the Easiest Credit Card to Get With No Credit?

4. Become an Authorized User on a Credit Card

If you can't qualify for a credit card on your own, see if a friend or family member with good credit will add you to their credit card account as an authorized user. As an authorized user, you'll benefit from the primary cardholder's positive credit history and on-time bill payments.

Learn more:

• What Is an Authorized User on a Credit Card?
• Will Being an Authorized User Help My Credit?

5. Consider a Credit-Builder Loan

Credit-builder loans don't require a credit history—instead, they help you build one. You can get credit-builder loans from banks, online lenders and credit unions. The loans usually range from $300 to $1,000 and are a good option if you don't have a security deposit for a secured credit card.

The money you borrow is put into a savings account; you make monthly payments and receive the money when the loan is paid off. For the biggest impact on your credit scores, look for a lender that reports your payments to all three credit bureaus and be sure to make your payments on time.

Learn more:

• What Is a Credit-Builder Loan?
• How to Get a Credit-Builder Loan

6. Join a Lending Circle

Lending circles are groups where members chip in a certain amount of money each month to a shared pool. Members take turns to receive the money in the pool and pay it back. You can find lending circles through nonprofit organizations. Mission Asset Fund is one example of a lending circle that reports to all three consumer credit bureaus, which can help you build credit.

Learn more: What Is a Lending Circle?

7. Get a Debit-Credit Hybrid Card

A debit-credit hybrid card is a cross between a debit card and a credit card. You can use them like a credit card, making purchases and paying them off over time. Like a debit card, however, the amount you can spend is usually determined by how much money you have in a linked checking account or loaded onto the card. Debit-credit hybrid cards (sometimes called "crebit" cards) include the SuperCash Card, Tomo Credit Card, Extra Card and Zoro Card.

Learn more: How Debit-Credit Hybrid Cards Can Help You Build Credit

Experian Can Help You Build Credit

Get Credit for Paying Rent, Utility and Cellphone Bills

Experian Boost^®ø is a free feature that adds your eligible on-time rent, utility, cellphone, insurance and streaming service payments to your Experian credit report, which could help improve your credit scores. You'll need an SSN, a bank account and a free Experian membership to use Experian Boost.

Get Guidance From Experian Go

Experian Go^™ gives you guidance in next steps for building credit. It's ideal for immigrants with an SSN and government-issued ID but no U.S. credit history. Simply download the Experian app and sign up for a free Experian membership to get started.

Streamline Credit-Building With Experian

If you're thinking about opening a new checking account, the Experian Smart Money^™ Digital Checking Account & Debit Card can help you build credit without debt by automatically linking to Experian Boost, which gives you credit for eligible bill payments after three months of payments. You'll also pay no monthly fees^¶ for Experian Smart Money, have access to more than 55,000 fee-free ATMs worldwide^** and could receive your paychecks up to two days early when you enroll in direct deposit^†. You can get an Experian Smart Money Account through a free or paid Experian membership, which also gives you access to your FICO^® Score, Experian credit report and more. See terms at experian.com/legal.

Track Your Progress

Once you begin establishing a credit history, regularly review your credit report to keep tabs on your progress.

• If you have an SSN, you can get a free copy of your Experian credit report and FICO^® Score or request copies of your credit report from each of the three credit bureaus at AnnualCreditReport.com.
• If you have an ITIN, you'll need to print and fill out a request form at AnnualCreditReport.com and mail it to each credit bureau to request your credit report.

If you have an SSN, you can sign up for free credit monitoring with Experian to track your credit report and credit score.