Janice Lozano
A credit score is a rating given to your financial background when assessed by a lender. It is an important function in the world of personal finance, especially for international students in the US who are looking to take out loans and finance different purchases. International students can get credit cards, but they will likely need an ITIN or someone who will let them become an authorized user on their card. One of the easiest ways to build credit as a new international student in the US is with a credit card. Using a credit card responsibly is a simple way to build and maintain a good credit score.
| Characteristics | Values |
|---|---|
| Credit score | A rating given to your financial background when assessed by a lender |
| Importance of credit score | Determines eligibility for loans, financing, mortgages, car insurance, off-campus housing, etc. |
| Building credit score | Using a credit card responsibly, getting added to the account of someone with good credit, reporting rent payments, getting a part-time job, etc. |
| Credit card | One of the easiest ways to build credit; can be obtained by international students with an ITIN, passport, or by becoming an authorized user on someone else's card |
| Credit bureaus | Three major US credit bureaus provide a free annual report |
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What You'll Learn
Getting a credit card
International students can get credit cards, but it may be challenging to get approved without a US credit history or Social Security Number (SSN). Here are some tips for getting a credit card as an international student:
Get a Part-Time Job
Depending on your student visa, you may be able to secure part-time employment. Working a part-time job can help you in two ways. Firstly, it can increase your income, which can improve your chances of credit card approval. Secondly, having a job can qualify you for an SSN, which is required by most credit card applications.
Apply for a Secured Credit Card
A secured credit card is backed by collateral, usually a security deposit from the cardholder. This deposit often serves as the card's credit limit, reducing the risk for lenders. With a secured card, you can build your credit history over time and eventually qualify for an unsecured credit card.
Become an Authorised User
If you know someone with a credit card, you can ask them to add you as an authorised user. This will give you access to credit without needing to qualify for your own card. Just keep in mind that any credit impact, positive or negative, will be shared with the primary cardholder.
Apply for a Student Credit Card
Some credit card issuers provide cards exclusively for students that only require your passport to apply. These cards can be a good option if you don't have long-term plans to stay in the US but still want to build your credit.
Build Credit History
Credit card issuers review credit history when evaluating applications. You can build your credit history by making timely payments on any credit accounts you have, such as loans or store credit cards. Remember that your credit score is significantly affected by the timeliness of your payments.
It's important to carefully review the requirements and policies of different credit card issuers when choosing a credit card as an international student.
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Becoming an authorised user
International students in the US often have no credit history, which can make it difficult to secure loans, financing, or mortgages. One way to build credit is to become an authorised user on someone else's credit card. This means you have a credit card in your name that's attached to someone else's account. As an authorised user, you can make purchases with the card, assuming the primary account owner agrees.
To become an authorised user, you'll need to provide basic personal information such as your name, address, birth date, and Social Security number. It's important to note that becoming an authorised user on someone else's credit card account can impact your credit score positively or negatively. The primary account owner needs to have a good credit score and responsibly manage the account. If there's a history of late or missed payments on the account, it will tend to lower the credit scores of both the primary account holder and the authorised user. Therefore, it's crucial to seek an authorised user relationship with someone who has strong credit habits.
As an authorised user, you can benefit from having access to more available credit, which can lower your credit utilisation rate. Credit utilisation, or the percentage of your credit limit in use, is a significant factor in determining your credit score. By becoming an authorised user on an account with a higher credit limit, you can improve your overall credit utilisation rate.
It's important to remember that being an authorised user is just one step in building your credit score. You will eventually need to establish credit independently by opening your own accounts and developing good credit management habits. As your credit score improves, you can consider getting a credit card in your name and easing out of the authorised user relationship.
Additionally, international students can explore other options to build their credit scores, such as using a credit card responsibly, reporting rent payments to Experian's RentBureau, or applying for credit-builder loans.
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Reporting rent payments
As an international student, building a credit score in the US is crucial. One way to build credit is by reporting rent payments. While rent payments are not automatically included in credit scores, you can use rent-reporting services to add them to your credit reports.
Rent-Reporting Services
Rent-reporting services can help you get your rent payments reflected in your credit reports, thereby improving your credit score. Some popular rent-reporting services include Self, Boom, RentReporters, Esusu, TurboTenant, PayYourRent, and Bilt. These services typically require you to link your bank account to track and report rent payments automatically.
Opting for a Rent-Reporting Service
- Check with your property manager or landlord: Find out if your property manager or landlord already works with a rent-reporting service. If they do, you can simply opt into that service, which is usually free for tenants.
- Choose a reputable service: If your landlord doesn't offer a rent-reporting service, you can sign up for one directly. Research different providers, their costs, and what they offer. Some services may charge a fee, while others are free.
- Provide necessary information: During the registration process, you'll need to provide basic information about yourself and your landlord. Be prepared to share details such as your personal information and landlord's contact details.
- Verify rent payments: Once enrolled, the rent-reporting service will verify your rent payments with your landlord. They will then update your credit report, reflecting your on-time rent payments and improving your credit score.
- Monitor your credit score: Rent-reporting services can help boost your credit score over time. Keep track of your credit score by periodically checking your credit report.
By reporting your rent payments, you can build your credit history and improve your overall creditworthiness. Remember to be diligent about making timely rent payments, as this will positively impact your credit profile.
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Getting a part-time job
International students can start building their credit score in the US by getting a part-time job. A part-time job will not only qualify them for a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN) but will also prove that they can pay their credit card bill on time.
Before applying for their first credit card, international students should start building a financial profile. The best way to begin this process is by speaking with the international student affairs office at their educational institution. The office can inform students of their eligibility to get an on- or off-campus job, which in turn determines their eligibility to apply for an SSN. If an individual is not eligible for an SSN, they can apply instead for an ITIN. Approval for an SSN can take up to four weeks, and an ITIN can take seven weeks, so it’s best to do this once you determine which form of ID you are eligible for.
Afterward, it’s time to build credit. International students can open a checking account at a US bank. A checking account tells a credit card company that the applicant has monetary assets in the country. It may also be easier to apply for a credit card later with the same bank.
Credit card issuers will also look at other factors, including income. If you can, consider getting a part-time job or working on campus to show you have enough money to pay your bills.
Once you have a credit card, it's important to use it responsibly. Make timely payments and keep your credit utilization low. This will help build your credit score.
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Applying for a loan
As an international student, you may not have a credit history in the US, which makes it difficult to get a loan. Most lenders require a US co-signer, who is legally obligated to repay the loan if you fail to pay. The co-signer must be a US citizen or permanent resident with good credit, an income history, and must have lived in the US for at least two years.
There are, however, some lenders that offer loans to international students without a co-signer. You can use a loan comparison tool to see if you're eligible to apply for a loan without a co-signer.
If you are looking to build your credit score in the US, there are a number of ways to do so. One of the easiest ways is to get a credit card and use it responsibly. Credit cards are widely used in the US, and not having one can make it difficult to do certain things like buying things online or renting a car. You can build your credit score by using a credit card for daily purchases and paying off your charges each month.
Another way to build your credit score is to report your rent. In the US, rent is not automatically reported on your credit report, but Experian is now accepting rent reports. You can register with their RentBureau to make your off-campus housing costs count towards your credit score.
You can also build your credit score by taking out an education loan that transfers the funds directly to your university. You will need a local bank account to receive your living expenses from your university, so it's important to spend time researching banks in the area.
Finally, you can build your credit score by becoming an authorised user on someone else's credit card, such as a sibling who is already studying in the US. However, keep in mind that a joint card means joint responsibility for any negative or positive impact on your credit score.
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Frequently asked questions
A credit score is a rating given to your financial background when assessed by a lender. It is a number that shows potential retailers and banks their overall credit rating. The higher your credit score, the more likely you are to be offered loans, financing, or mortgages. International students may need a credit score if they are looking to take out loans to finance purchases or pay tuition fees.
One of the easiest ways to build credit as an international student is with a credit card. Using a credit card responsibly by making timely payments and keeping credit utilisation low is a simple way to build and maintain a good credit score. International students can also get credit cards by applying for an ITIN, becoming an authorised user on someone else's card, or by getting a part-time job to show proof of income.
International students can use tools like UltraFICO™ and Experian Boost to report positive account activity to credit bureaus, including utility bills, subscriptions and rent payments. They can also consider getting a co-signer who is a U.S. resident and has a good credit score.
