Lana Oconnell
International students do not have a credit score when they first arrive in the US, and building one from scratch can be challenging. A credit score is a rating that indicates how financially responsible a person is, and it is essential when applying for loans, credit cards, insurance, or even when renting an apartment or buying a car. International students can start building their credit score by opening a local bank account, getting a part-time job, and applying for a credit card. They can also become an authorized user on someone else's card or apply for a secured credit card, which is backed by collateral. Additionally, international students can put utility bills in their name if the utility company reports payments to credit bureaus. Building a positive credit history in the US can be a lengthy process, but it offers enormous benefits in the long run.
| Characteristics | Values |
|---|---|
| Credit score | A rating given to your financial background when assessed by a lender |
| Credit card | Used to build credit score, required for most purchases |
| FICO score | The most common measurement used to identify your credit rating in the US |
| SSN | Social Security Number, required for most credit card applications |
| ITIN | Individual Taxpayer Identification Number, required for credit card applications if no SSN |
| VantageScore | An alternative credit scoring model to FICO |
| Secured card | Backed by collateral, usually a security deposit from the cardholder |
| Prepaid card | Funds loaded directly onto the card, no bank account required |
| Student credit cards | Designed for young college students, no annual fees and some cash-back rewards |
| APR | Annual Percentage Rate, a yearly charge for borrowing money |
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What You'll Learn
Credit scores and credit history
Your credit score is a three-digit number, typically ranging from 300 to 850, that predicts your financial risk as a borrower. It indicates how likely you are to repay a loan and make timely payments. The higher your credit score, the more favourable your credit history, and the higher your chances of securing loans and lower interest rates.
Credit history is a detailed report of your financial behaviour, including your repayment history, credit utilization, and the length of your credit activity. It outlines whether you have paid your bills on time, the amounts owed, the available credit used, and the number of recent credit inquiries. Lenders review this information to assess your reliability as a borrower and decide whether to extend credit to you.
As an international student, building a credit history and improving your credit score can be challenging. You may face obstacles such as not having a Social Security Number (SSN) or an Individual Tax Identification Number (ITIN), which are commonly required for credit card applications. Additionally, having a limited or non-existent U.S. credit history can make it difficult to get approved for credit cards or loans.
However, there are ways for international students to start building their credit history. One option is to apply for a secured credit card, which is backed by collateral, usually a security deposit from the cardholder. This deposit serves as the card's credit limit and shields lenders from risk. Another option is to become an authorized user on someone else's credit card, allowing you to build a credit history without the need for your own card. Additionally, putting utility bills in your name can help build a positive credit history if the utility company reports payments to credit bureaus.
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Getting a credit card
International students can get credit cards, but the process can be challenging. Here are some steps to help you get a credit card as an international student:
Check Your Eligibility for an SSN or ITIN
Before applying for a credit card, international students should start by checking their eligibility for a Social Security Number (SSN). To do this, you can speak with the international student affairs office at your educational institution. They can inform you of your eligibility to get an on- or off-campus job, which determines your eligibility for an SSN. Most credit card applications require an SSN, and having one can make the application process easier.
If you are not eligible for an SSN, you can apply for an Individual Taxpayer Identification Number (ITIN). To be eligible for an ITIN, you must have a "valid tax reason," such as filing a U.S. federal tax return or being a dependent or spouse of a U.S. citizen. An ITIN can be a viable alternative when applying for a credit card, although it may be less commonly accepted than an SSN.
Build Your Credit History
Once you have determined your eligibility for an SSN or ITIN, it's time to start building your credit history. Here are some ways to do this:
- Open a checking account at a U.S. bank: Having a bank account demonstrates to credit card companies that you have monetary assets in the country. It may also be easier to apply for a credit card with the same bank later on.
- Put utility bills in your name: If a utility company reports payments to credit bureaus, putting utility bills in your name can help build a responsible financial history.
- Get a part-time job: Depending on your student visa, you may be able to work part-time, which will provide proof of income for your credit card application.
- Apply for a student credit card: Student credit cards are designed for college students applying for their first credit card and often come with benefits like no annual fees and cashback rewards.
Explore Other Options
If you are unable to obtain an SSN or build a substantial credit history, there are still some alternatives to consider:
- Become an authorized user: You can gain access to credit by becoming an authorized user on a trusted person's credit card. This can help build your credit history when used responsibly.
- Apply for a secured credit card: A secured credit card is backed by collateral, typically a security deposit from the cardholder, which serves as the card's credit limit. This option allows you to build your credit history over time.
- Prepaid credit cards: Prepaid cards do not require a bank account, as you load funds directly onto the card. This option suits international students who are not interested in building a U.S. credit history.
- Store credit cards: These cards are limited to specific stores and often offer rewards like discounts and early access to promotions. However, they typically have lower credit limits than traditional credit cards.
Remember that building credit as an international student can be challenging, and you may need to explore multiple options before finding the right credit card for your situation.
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Credit card alternatives
As an international student, you may face challenges when applying for your first credit card in the US. Most credit card applications require a Social Security number (SSN) or Individual Tax Identification Number (ITIN), as well as a credit history. If you don't have an SSN or ITIN, you can apply for one, but this can take several weeks.
Secured Credit Cards
Secured credit cards are a good option for those without a credit history or with bad credit. They require a cash deposit upfront, which serves as your spending limit. This deposit shields lenders from risk and can help you build your credit history over time. However, if you don't pay your bill, the issuer will take the payment from the deposit, and late payments will be reported to credit bureaus, potentially harming your credit score.
Prepaid Cards
Prepaid cards are similar to gift cards in that you load funds directly onto the card, and you can only spend what you have deposited. They are a good short-term option for international students who don't want to open a US bank account or build a credit history.
Debit Cards
A debit card linked to your bank account is another alternative. You can use it to shop online, over the phone, and in-store, but you can't spend more than what you have in your account. This can help you avoid debt, but it's important to keep track of your spending to avoid draining your account.
Alternative Cards
The Zolve Credit Card is an option for those without an SSN, as long as you have alternative documentation, such as an I-20 form for students. This card reports to the three major credit bureaus and offers different subscription plans with varying terms, features, and costs.
Authorized User
Becoming an authorized user on someone else's credit card can be a workaround if you can't qualify for your own card.
While these alternatives can be helpful, building a credit history as an international student may still be challenging. Speaking with the international student affairs office at your educational institution can be a good first step to understanding your options.
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Building credit
As an international student, you won't have a U.S. credit score when you first arrive in the country. Credit scores are a rating of your financial background and are used by lenders to assess your eligibility for loans or credit cards. They are calculated based on your credit history, including your payment history, how much credit you use, and how many new accounts you've opened recently.
Get a Credit Card
One of the easiest ways to build credit in the U.S. is to get a credit card and use it responsibly. Credit cards are widely used in the U.S., and having one can make it easier to make purchases, rent a car, or buy things online. Most credit card applications require a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN), but some issuers will accept a visa or passport information. You can also become an authorized user on someone else's card, which can help you build credit history.
Build a Financial Profile
Before applying for a credit card, it's essential to build a financial profile. You can start by speaking with the international student affairs office at your educational institution to determine your eligibility for an on- or off-campus job and an SSN. If you are not eligible for an SSN, you can apply for an ITIN. Having a steady income will also make it easier to qualify for a credit card.
Open a Bank Account
Opening a local bank account is critical to establishing your credit profile in the U.S. While your bank transactions and balances are not reported to credit reference agencies, having a bank account will help you manage your finances effectively and make payments on time. Unpaid bank fees or penalties will be reported and can negatively impact your credit score, so be sure to understand the terms and conditions of your account.
Make Regular Payments
Paying off your credit card charges each month or week is an excellent way to build credit. Lenders like to see regular use of the card and steady payments. Setting up automatic payments for at least the minimum amount due each month can help ensure you never miss a payment.
Explore Other Credit-Building Options
In addition to credit cards, there are other options for building credit. Student loans, for example, can help build credit, as can putting utility bills in your name if the utility company reports payments to credit bureaus. Secured credit cards or credit-builder loans are also options for those without an established credit history.
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Credit card security
Credit cards have become an essential part of life in the US, with many people using them as widely, if not more so, than cash. For international students, they are a good way to build a credit score and can be almost obligatory for certain activities such as renting a car or shopping online.
However, there are several challenges for international students seeking to get a credit card in the US, including the requirement for a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN) for most applications. International students are also unlikely to have a US credit history, which can make the application process more difficult.
Despite these challenges, there are some options available to international students seeking to get a credit card in the US. These include:
- Applying for a secured credit card, which is backed by collateral, usually a security deposit from the cardholder.
- Becoming an authorized user on someone else's credit card.
- Applying for a prepaid card, which does not require a bank account and can be loaded with funds as needed.
- Applying for a credit builder loan.
- Choose a secure password and PIN for your credit card accounts. Avoid using the same password for your credit and banking accounts as you do for other accounts. Create a strong password by using a mix of numbers, letters, and symbols, and ensuring it is at least 15 characters long.
- Enable security features such as text alerts and 2-factor authentication.
- Keep a list of your credit cards and their account numbers, as well as the customer service numbers of your bank, in a safe place.
- Be cautious when giving out your credit card information over the phone or online. Avoid public Wi-Fi when making purchases or providing sensitive information, and only shop on secure websites (look for the 'https' in the web address).
- Shred old credit card statements and bills or go paperless to prevent your account information from falling into the wrong hands.
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Frequently asked questions
Building credit as an international student can be challenging, but it's not impossible. The first step is to open a bank account in the country you're studying in. This will allow you to manage your finances effectively and make payments on time. You can also apply for a secured credit card, which is backed by collateral, or become an authorized user on someone else's card. Using a credit card responsibly is a great way to build your credit score.
It's hard to determine what a good interest rate is as a student, but as of December 2019, the average credit card interest rate in the US was 17.30%. It's important to compare the rates of different card issuers and do your research.
While it's not mandatory, having a credit card as an international student can be incredibly helpful. Credit cards allow you to start building credit, which will impact your ability to obtain loans for large purchases in the future. They are also widely used in the US and can make it easier to buy things online or rent a car.
