Ask Penny: I’m an immigrant — how can I build credit in the U.S.?

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In a Nutshell

“Ask Penny” is a column from Credit Karma to help you tackle your real-world financial questions. All those pesky thoughts that keep you up at night, those concerns that pile up, or those little questions that can pop into your head at any time — we’re here to help answer them. Want to learn more about credit or have a student loan question? Curious about ways to manage your debt or solve other financial challenges? Email
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Hi, Penny — I recently moved to the U.S., and I know that establishing a credit history is important, but I don’t know how to get started. How do I build credit from scratch?

— New to the States

Hi, New to the States!

In the U.S., credit scores are used frequently to make decisions about loans, credit cards, apartments, insurance, cellphone contracts and utility accounts. Some employers even check your credit before offering you a job. With so much at stake, it can feel a little overwhelming, right?

The good news is there are many ways to build credit. But before you start your credit-building journey, there are a few things to do first. Let’s look at what to consider before you start building credit and how you can do it when you’re ready.

What do you need to start building credit in the U.S.?

Before trying to establish credit in the U.S., there are a few things you may need to do to get ready.

  • Social Security or individual taxpayer identification number — You might have heard that you need a Social Security number to get credit. Having one may make it easier. But it’s possible to get credit without a Social Security number. If you don’t qualify for one, some credit card issuers accept individual taxpayer identification numbers. You can apply for an ITIN with the IRS.
  • Source of income — Lenders want to know you have enough money to repay them. You need to show you have a reliable source of income to make your payment each month.
  • Bank account — Depending on the type of credit you apply for, you might need a checking or savings account to show you have the resources to make your payments. Even if it’s not a requirement, having a bank account makes it easier to deposit your paychecks and set up automatic payments.

Ways you can build credit in the U.S.

There are multiple ways to build credit from scratch. Here are some to consider.

Apply for a secured credit card

Secured credit cards require a security deposit that’s usually equal to your credit line. If you don’t pay your bill, the credit card company can keep the deposit as payment. Because they’re backed by a cash deposit, secured cards are typically easier to qualify for than unsecured cards.

Take out a credit-builder loan

A credit-builder loan works like a personal loan in reverse. Instead of giving you the loan proceeds upfront, the lender puts the money in an account. You make loan payments each month and when you’ve paid the full loan amount, the lender releases the funds to you.

Become an authorized user

A family member or trusted friend can add you to their credit card account as an authorized user. Many companies report the primary cardholder’s activity to the credit bureaus in the authorized user’s name. Some issuers don’t, so it’s important to check. If the account holder makes their payments on time, this strategy can give your scores a boost, but the opposite is also true.

Have your rent reported

Some property management companies report rent payments to the credit bureaus. If your landlord doesn’t, you can sign up with a rent payment service like RentTrack that reports it for you. You may need to pay a fee for the service.

Work with a local organization

It can be challenging to get accurate financial information if you’re new to the U.S. Local agencies may be able to help you find reliable financial information in your community, including how to build credit.

Seek out financial institutions that take alternative information

If you don’t qualify for a Social Security number, look for financial institutions that accept ITINs or other forms of identification such as a passport, national ID card or other government-issued ID.

How to stay on track while you build credit

Building a strong credit history doesn’t have to be difficult, but it takes consistent on-time payments, and it won’t happen overnight. You typically need about six months of payment history to have enough information to generate a score, but it varies depending on the scoring model.

It’s important to pay your bills on time. Late payments hurt scores and can derail your hard work. Set up reminders or schedule automatic payments, so you don’t forget.

Once you have a credit report, it’s important to monitor it to make sure the information is accurate. If you find incorrect information in your credit report, dispute it right away so that the credit bureau can investigate. One last word of advice as you begin your new life in the United States: It’s an unfortunate reality, but there are people who try to take advantage of newcomers. Watch out for scammers who may try to trick you into paying for free services or steal your personal information.

About the author: Penny is Credit Karma’s conversation maven. If you’re a Credit Karma member and have had a question about your financial situation, you might have chatted with Penny about it in the Credit Karma app. Now, Penny wants… Read more.