“You can’t take it with you.” This is an American saying that means money and worldly possessions don’t follow you into the afterlife. Sadly, the same idea applies to your credit history when you move to the U.S.
When arriving to the U.S. with no American financial history, you are considered “credit invisible.” It can be extremely challenging to get a credit card, an apartment lease, a mortgage, or even a car if you don’t have a credit score in the U.S.
Although there are ways to demonstrate your financial health to American institutions using records from your home country, it’s not possible to transfer your credit history to the U.S. from abroad. However, there are ways to build a credit history once you arrive.
The article below provides general information about how to build credit in the U.S. Please talk to a professional financial or immigration advisor for guidance related to your individual situation.
Why Do You Need a Good Credit Score?
Lenders, including credit card and cell phone companies, apartment landlords, and gas and electricity companies, use your credit history to determine if you are financially stable and trustworthy when it comes to repaying loans.
To be able to take out loans or make major purchases, you often have to have a credit history in that country.
The better your credit score, the better the terms of the loan. Without an American credit history, you’ll potentially pay thousands of extra dollars in security deposits and interest rates. This is because the lenders may consider it risky to loan you money if you have no credit history or a low score.
What Is a Good Credit Score?
There are two primary models for determining a credit score: FICO and VantageScore. These models differ slightly, but in general, a good credit score is considered 670 or higher.
| Credit Score Category | FICO Score |
|---|---|
| Very Poor | 300-579 |
| Poor | 580-669 |
| Fair | 670-739 |
| Good | 740-799 |
| Exceptional | 800-850 |
Credit scores in the U.S. range from 300 to 850. Other countries’ credit scores follow different models and may go higher or lower than in the U.S. That's partly why you cannot transfer your credit history from your home country to the U.S.
How Long Does It Take to Build a Credit Score in the U.S.?
Most estimates say it takes about six months to generate your first credit score. It will take longer — potentially several years — before you achieve a good or exceptional credit score.
Building a credit score from scratch, such as when you first move to the U.S., is typically easier than trying to improve a bad credit score. Below are some tips for building good U.S. credit. Practicing good habits from the start will help you fast track your credit score from “invisible” to exceptional.
How to Build Credit in the U.S.
Getting a good score requires persistence and patience. Still, it is possible. Here’s how.
1. Pay your bills on time.
Having a long history of on-time payments is good for your credit score. A single late payment won't destroy your chances of a good score, but it will take months to recover from it.
2. Maintain low a credit balance.
Keeping credit balances low can help you build and improve your credit score. For example, if you have a new credit card with a $4,000 limit and you make $2,000 worth of purchases, you have a 50% utilization rate on that card. Your overall utilization rate on your revolving credit accounts (such as credit cards) is an important scoring factor.
Not maxing out your credit cards and keeping your utilization rate as low as possible, while still using your accounts, is best for your scores.
3. Keep credit cards and accounts open.
Closing accounts can decrease your available credit, which may increase your utilization rate and hurt your scores, so keep your credit cards and accounts open.
Unless you’re usually overspending, try not to close accounts.
4. Only apply for a new account when it's necessary.
Submitting new credit applications can lead to something called hard inquiries, which may temporarily decrease your credit score. Therefore, it’s usually best to only apply for a new account if you have a specific reason.
In other words, if you don’t need a new credit card or you aren’t sure you’re ready to take out a loan, don’t apply. You’ll avoid the hard inquiries and the dings they make to your credit score.
How to Transfer Your Credit History to the U.S.
Building a good credit score in America takes time, which is not ideal if you’ve recently moved to the U.S. and need a credit card or loan right away. While you can’t technically transfer your credit history, you can request an international credit report through a cross-border credit bureau.
An international credit report collects financial data such as previous payment history, credit scores from your home country, employment history, and other public records to determine your financial health. Then, a credit bureau like Nova Credit uses that information to create an American-equivalent score until you can establish a credit history in the U.S.
By essentially re-creating credit reports from countries like Mexico, India, Australia, and others as equivalent reports for U.S. lenders, Nova Credit makes it possible for you to use your international credit report to apply for U.S. loans, apartments, and more.
The easiest way to use your international credit report is to choose a credit card company or financial institution that partners with a credit bureau like Nova Credit. This includes companies like American Express, Chase Bank, and PayPal as well as several other banks and financial organizations.
Be Prepared for Going Abroad.
For better or worse, credit is important in the U.S. It has a direct impact on the credit cards you can get, sometimes the purchases you can make, and on the apartment you live in.
Good credit can also save you a lot of money over your lifetime. Whether you build your American credit history over time or use your international credit profile to apply for financial products, it is vital to understand the importance of credit. It’s one small but important part of being prepared when you go abroad.
Get more tips for staying safe when you leave home from SevenCorners.com.
