If you're looking to apply for a credit card, you probably know that your chances of getting one are pretty good if your credit history shows that you're financially responsible.
But that's not the case for everyone – notably U.S. immigrants, foreign students and H1B visa employees.
In other words, if you're someone who immigrated from France, just to pick a country at random, you may be the most financially responsible person on the planet – and make a good living to boot. Unfortunately, as expats around the world find, that credit score and credit report you've lavished attention to for years doesn't translate so well to other countries.
It isn't a language barrier issue. The reason credit histories don't travel well from one country to another is due to privacy laws that nations tend to have when it comes to sharing consumers' financial information between private companies. You'd think that those would have been worked out by now, deep into the 21st century and in a global society, but nope.
What that means is that if you've come to the United States to live, permanently or temporarily, like so many things, you're going to have to start over by building your American credit history. But it's certainly possible to find a credit card for new immigrants. Well, you may not find a credit card for new immigrants, but it's definitely feasible to find credit issuers that will approve cards for expats and U.S. immigrants.
If you're stuck and wondering how can immigrants get a credit card, there are a number of issues you'll want to begin exploring. Some of the steps you may have already taken, however, and you might be closer to getting a credit card than you think.
If you're already living here (versus preparing to move to the United States), you've probably already done this. In any case, this is your first step. Credit card companies are like any lender: they like to see that the borrower has a bank account – and preferably one in the country they are residing in.
Again, if you're in the United States, reading this, you probably have one – unless you're a college student from another country, in which case you might want to consider getting a part-time job, especially if getting a credit card is at the top of your priority list.
Why? Because credit card issuers either will want your Social Security number or a taxpayer identification number. Some credit cards will only take a Social Security number while others will take either the Social Security number and taxpayer identification number.
Now, once again, like a bank account and a job, odds are, you've already got a Social Security number. You probably applied for a number and card when you applied for your immigrant visa back in your home country. But, of course, that might not be the case.
For instance, Yvonne Heimann, a business consultant who lives Roseville, Calif., came to the states from Germany in 2007 (for those who want to check out her website, it's https://askyvi.com/).
Heimann said her first husband filled out their paperwork, or was supposed to, but he apparently made some sort of blunder that led to her being undocumented for years. The marriage ended, but Heimann stayed in the states, met another man and three years later, he proposed. Long story made shorter – Heimann's fiancé was diagnosed with cancer, and a few months after they married, he passed away in 2014.
Heimann at last got her green card and Social Security number in February 2015.
"As I was his caretaker for two years, there was no money or time to finish my paperwork earlier than that," she said.
Within an hour of receiving her Social Security number, Heimann applied for a credit card.
If you didn't get a Social Security number, or SSN, before you came to the United States, you'll want to visit a local Social Security office in person. According to the Social Security Administration's website, you'll want to bring with you Form I-551 (also known as your green card or permanent resident card), an admission stamp showing a class of admission permitting work, your Form I-94 or Form I-766 (also known as your employment authorization document (EAD) or work permit).
If you can't get a Social Security number – for instance, if you're a refugee from another country, unfortunately, you aren't allowed to get an SSN – you aren't out of luck. As long as you're earning money that the Internal Service Revenue (IRS) will want to collect taxes on, you will be able to get an individual taxpayer identification number, also known an ITIN. The IRS issues these numbers for individuals who aren't eligible to obtain a Social Security number, and it's used for paying taxes.
According to the IRS website, you'll need to use the most recent version of Form W-7. With your application, the IRS website says, "attach a valid federal income tax return, unless you qualify for an exception, and include your original proof of identity or copies certified by issuing agency and foreign status documents."
You'll send your return, Form W-7 and proof of identity and foreign status documents to:
Internal Revenue Service
Austin Service Center
P.O. Box 149342
Austin, TX 78714-9342
Want to speed things up and not rely on the mail? You can also apply for your ITIN by going to an IRS-authorized acceptance agent or at a taxpayer assistance center. Instructions on how to find both can be found at the IRS website. In any case, it will take time to receive your ITIN - possibly as long as six weeks, according to the IRS.
And if you don't have a Social Security number, and you want a credit card, you really have to get an ITIN. You have to have one or the other to have a credit card, and some credit cards will only accept an SSN. The ones that will possibly accept an ITIN include American Express, Bank of America, Capital One, Chase and Citi.
Maybe – and maybe not.
You can certainly apply for one, and you may get approved. But whether you get one depends largely on your credit history, and you probably don't have much of a credit history yet. It also depends on how much income your job pays. If you make a solid salary, some credit card issuers may overlook the fact that you don't have any credit history.
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"There are certain banks that will issue you a credit card with a small credit line to get you started. If you are a H1B visa holder you are likely earning more than average, and you can get credit, if you shop around," says Suresh Ramamurthi, chairman of CBW Bank in Weir, Kan.
Heimann found that, in her case, she was able to get a credit card with Capital One. She said that they approved her for a $300 credit limit initially. After six months of on-time payments, she was able to double her credit. Every six months, if she stays on time, she should be able to keep growing her credit, she said.
But if you're not so lucky, or are pretty sure you won't be, you're going to have to start building your credit.
Every country's financial and lending institutions have their own individual ways in which they judge the financial worthiness of a borrower, and that's important to remember as you start on your journey to build credit in the United States.
We won't go through every country on the map and discuss how each differs from the American way of doing things, but essentially Canada and England have scoring models that are similar to the United States so you may not have too much credit scoring culture shock if you've moved from those countries. South Africa has a very strong credit reporting system, and again, you may not find the changes all that different, but much of the rest of Africa has a very weak system – and in some countries, there's no credit reporting system at all. Bottom line: Whatever your country, don't assume that the credit reporting rules are just like they in the United States, and don't assume that they're nothing alike.
There's a lot to know about how American credit scores and credit reports work – books have been written about it, and plenty of articles have been written. But a few factors you may want to take note of.
America has three main credit bureaus: TransUnion, Experian and Equifax. They collect financial data on you. Basically, if you apply for a credit card, those three companies know about it. If you buy a car or a house, they'll be given that information, too. Are you paying off student loans? That information is being collected by the bureaus. Anything you borrow money for, that information is reported to the three credit bureaus. And based on how timely you are paying back your loans, the credit bureau will then produce a credit score, which is based on the information compiled by the bureaus (known as a credit report).
The credit score numbers vary among the three credit bureaus, but generally you'll want to think of the range as about 300-850. The higher your credit score, the better type of loan you can get. If you're into the 700s or 800s, you'll be considered to have good to excellent credit.
If your score is the in the 600s – well, the top half of the 600s – that's considered average to good.
If you credit score is bad, it's probably in the 300s to the low 600s, and it becomes pretty hard to get a loan. Frankly, if you have a miserable credit score, you probably don't want a loan, if you can avoid it – because the interest rate will be high. Certainly, if you get a credit card with a high interest rate, you'll really want to make sure that you make the full payments every month, so you don't get stuck in revolving debt.
Incidentally, the chances of anyone having a 300 credit score are very slim; very few people actually reach an 850 either.
You probably know all or most of this, and as noted, several countries operate in the way that the United States does. That said, many countries have somewhat different systems.
For instance, Heimann says that in Germany, the credit scoring system is very different than in America. She never had credit cards back in her native country.
"Germans don't use credit cards like Americans do," she said. "In Germany, you have good credit if you don't use credit."
Whereas in America, people are encouraged to take out credit cards, as long as they use them responsibly. By borrowing money, you can develop excellent credit – provided you pay back the loans within the grace period. That is, before your minimum payment is due, and preferably, you'll pay back everything in full every single month, if you want to have an excellent credit score (and not pay a fortune in interest charges).
Because your country may do things differently, it probably wouldn't hurt to know a few things about how American credit bureaus figure your credit score.
Payment history. This is generally about 35 percent of your credit score. If you're late with a lot of credit card payments, or any payment – you don't want to be late with the electric or cable bill either – then your payment history starts looking bad, and that can keep your score from going higher and even drive your score down.
Amount of money owed/credit utilization. This probably isn't a big deal for you. If you don't have a credit card, and you've taken out no loans, then you're in good shape. If you owed lenders, say, $50,000, and it looked to lenders as if you'd have trouble paying it back, then a credit card company isn't likely to give you a credit card. Likewise, once you have a credit card, if you're constantly maxing that card out, your credit card utilization is high – meaning you are using all or most of the credit available to you and is worrisome to lenders. Anyway, everybody's situation is different, of course, but you probably don't have to worry about this right now. This tends to make up about 30 percent of your credit score.
How long you've had a credit history. This makes up 15 percent of your credit score, and if you've recently moved to America, and you haven't taken out any loans, this is a strike against you. Lenders like looking at a credit report and seeing a long history of taking out – and paying back – loans. But don't worry about it. Times flies. You'll have a credit card sooner or later, and you'll eventually have a credit history.
The types of credit that you have. This makes up about 10 percent of your credit score. You really don't need to worry about this right now either, if you've just moved here. Lenders love seeing borrowers who are successfully paying off a lot of different types of debts, like a house, car, a couple credit cards and maybe student loans. Bankers and credit card issuers see that diversity of debt, and if you can handle it, they know that you can probably manage a little more. But if you're just starting off, then that's the way it goes. You don't want to start trying to borrow money from a lot of different places just to prove to lenders that you're a good credit risk. You really don't.
New credit. Lenders look at whether a consumer is applying for a lot of credit cards at once and a lot of loans in general. This generally factors into 10 percent of your credit score, so it's not huge. But if you had a week where you applied for a dozen credit cards and tried to take out a loan for a house and a car lenders might think, "Boy, this consumer is desperate for money and maybe not the most financially responsible person." So if you're in the market for a credit card, apply for one card and see if you get it.
If you do get approved for the first credit card that you apply for, and you want a second credit card right away, well, that's up to you, but it's probably best to stop at two credit cards, for at least awhile, if you want to avoid hurting your credit score. If you're turned down twice, you'll definitely want to not apply for any more for awhile. The rejections probably mean that lenders don't see you as a good credit risk yet, and applying for a bunch more credit cards in a short span of time, like within a month, will not make them feel any better about lending you money.
"If you do have a Social Security number or a taxpayer ID number but don't have a credit score, you can build one through certain credit cards, including secured credit cards," Ramamurthi says.
Secured credit cards operate like any credit card, but they require you to give the credit card company money. (Yes, that sounds weird or wrong, but we'll explain.) So, for instance, you might give a secured credit card company $500, which the company will hold onto and use that amount to establish your credit limit on the card they issue you. Then maybe you buy $100 worth of merchandise, using your credit card, and then you pay $100 back by the due date.
If you do that for several months – buy some stuff and pay for it before the due date – you're showing the credit card issuer that you know how to use a credit card responsibly. And, by the way, if you do go this route, it's still best if you don't use all the credit available to you on that card.
You want to use your secured credit card just as you would a conventional credit card. Eventually, usually between six and 12 months, you'll be allowed to move up from the credit card company's secured credit card to an unsecured, or traditional, credit card. And, yes, if you used the secured card responsibly and made all your payments, you'll get your deposit back.
If you're thinking about getting a secured credit card, you'll want to especially look for a few things:
Annual fees. Look and see if there is one – this would be in addition to the security deposit you're required to make to establish your line of credit. Some secured credit cards have them. The annual fees generally aren't too high for secured credit cards, and if it looks like a good card, you may not mind paying it. Still, you want to be aware of that. There are secured credit cards out there without annual fees.
Does the secured credit card report to the credit bureaus? Not all secured credit cards report your payments to all three credit bureaus, which means that you're building a history with the credit card issuer – but nobody else. So try to get a secured credit card that reports your information to the three major credit bureaus. Most major banks issuing secured cards will report to the bureaus, but ask specifically just to be sure.
The fine print. It's a good idea to read the fine print with all credit cards, secured or otherwise. All credit cards offer a lot of information on their websites, when you apply for them, as to how they work – how much the interest rate is, and how the interest rate is calculated, for instance. You'll want to read it carefully, and if you have any trouble with the English language – you probably don't; you're reading this after all – but if you do, you'll want a trusted relative, friend or co-worker to take a look. You don't want to end up with a credit card that has terms you will later regret agreeing to.
The grace period. Most traditional credit cards offer a grace period before they begin charging interest on your purchases. This is generally the 20 or so days between when your billing cycle closes and when your bill for that statement is due. HOWEVER, not every card, especially those offered to individuals with lower credit scores, offer grace periods. If you don't have a grace period, that means your purchases will begin accruing interest from the moment you make them – that could create a substantial added charge on your monthly bill. Your best bet is to ensure any card you apply for offers a grace period, but if you can't find one that does, just be prepared to make multiple payments each billing cycle so that interest isn't sitting there accruing for an entire month.
There are a couple of other ways to establish a credit history, but really, the best options are either shopping around, and if you have a good job, applying to one or two cards – and failing that, getting a secured credit card.
That said, you could ask a relative in America with his or her own credit card to co-sign for a credit card with you. This, however, isn't a great idea, unless you are 100 percent certain you'll pay all your bills on time. If you have trouble paying off the card, your relative will be legally responsible for it. If this is a close relative, and if you have a good job, and you're beyond confident that you can make the payments, maybe this isn't much of a risk. Still, enough people have gotten into trouble with credit cards that nobody can say co-signing is a terrific idea. Still, yes, it is an option. It may be the only realistic option, in fact, if you're a foreign exchange student and unable to get a credit card – American college students under the age of 21 have trouble getting credit cards without a job, so you're not alone in that regard.
You could also ask a relative in America to make you an authorized user. This is possibly a better idea. You'll get a credit card, and you can make payments and pay the credit card online – or you give the relative the money, and they can make their monthly credit card payments. If your relative has a healthy credit history and is financially responsible, that can end up helping your credit score.
Again, though, this could backfire. If your relative ends up missing a payment or has a spotty credit history, then that could end up reflecting on you and hurting your credit score. You could also make things stressful for your relative if you rack up a lot of charges, and you can't pay them off, since your relative is legally bound to do so. But at least if you somehow as an authorized user went berserk and spent a crazy amount of money, your relative would likely see the purchases on the website account and could quickly rescind your credit privileges, make you an unauthorized user and stop the financial damage.
When you have a relative co-sign, typically, you have your own credit card and your relative doesn't know what you're buying with it – and may not know for months, when you're deep in debt. You have less freedom when you're an authorized user of a relative's credit card, but that's a good thing. If you're not great managing money, you probably won't get into too much trouble. And if you are good at managing money, well, all the better.
In short, none of this is easy, but then moving to another country never is. It's at once exciting and an exercise in patience. Just like getting building a credit history and finally getting a credit card.