Overcoming The Unique Credit Building Challenges Faced By Immigrants

John Ulzheimer

John Ulzheimer | Blog

Jan 12, 2015 | Updated Apr 27, 2016

It is common knowledge that consumers with poor credit reports and credit scores face considerable financial challenges. Purchasing a vehicle, qualifying for a mortgage, and even opening a new mobile phone account can all prove to be difficult, if not impossible, for people with poor credit.

What might surprise you, however, is just how difficult it can be for people who are new to the country to qualify for credit. In fact, their nonexistent credit history will often cause just as many problems as someone with poor credit.

Challenges For Immigrants

It’s unfortunate for immigrants but any credit history you build in your country of origin does not transfer to the United States, because the U.S credit reporting agencies, Equifax, TransUnion, and Experian, don’t share data across borders. The only exception is Equifax and Equifax Canada, which do share information across borders. But, generally speaking, an immigrant to the United States won’t be bringing her credit history with him.

New immigrants to the United States face many of the same challenges that are faced by a young person establishing credit for the very first time. However, in many cases these credit-building challenges are further compounded by a language barrier, a lack of understanding of our banking system, and the complexity of understanding a new currency system. In fact, depending on the immigrant’s country of origin the very concept of credit reports and credit scores may be completely new.

When a consumer has no credit history they will also have no credit scores. Without credit scores it can be very difficult to be approved for new credit. Thankfully anyone without credit history, whether she be an immigrant or a recent high school graduate, does have the ability to build credit in a short amount of time and with minimal effort.

For much more on building credit, take a look at our Definitive Guide to Building Credit from Scratch.

Credit Building Tips For Immigrants

1. Leverage Existing Relationships

If an immigrant already has an existing credit card which was issued outside of the United States from a credit card issuer that also offers cards in the U.S (i.e. American Express, Capital One, Barclaycard, etc.) then she might be able to open a new credit card with the same card issuer, even without U.S credit history.

Of course, having a great payment history with the existing credit card issuer in question can help to make this process much easier. If she is able to accomplish this then it’s only a matter of time before the newly opened U.S. account will actually create a new credit report for the immigrant.

2. Authorized User Accounts

If an immigrant already has a loved one living in the United States it’s possible to become an authorized user on that person’s credit card(s), providing a head start in the credit building department. Credit card issuers will commonly report the payment history of a credit card on the credit reports of both the primary cardholder and the authorized user.

As long as the credit card has a history of on-time payments and has a low balance relative to the credit limit then the account can go a long way toward helping the immigrant establish strong credit reports and scores.

Learn everything you need to know about adding an authorized user here. 

3. Secured Credit Cards

One of the easiest credit building products available to consumers with no credit history is the secured credit card. With a secured credit card the cardholder will place a deposit with the issuing bank, and the bank will issue a card with a credit limit equal or close to the deposit.

Since there’s very little risk for the issuing bank getting an approval is generally an easy process. In fact, even resident aliens who have not yet obtained citizenship can often qualify for a secured credit card using their individual tax identification number (ITIN). As long as the new credit card is properly managed a secured card can be another great way to establish positive credit history and credit scores.

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