Douglas Olsen
Building a credit history as an international student in the US is important for your financial future and can bring enormous benefits in the long run. A good credit score can make it easier to rent an apartment, buy a car, or even get a job. However, it can be challenging to build credit history as a new international student, especially without a Social Security Number (SSN) or existing credit history. The best time to start building credit is as soon as possible, and there are several ways to begin this process, including opening a checking or savings account, using a credit card responsibly, paying utility bills on time, and applying for credit-builder loans.
| Characteristics | Values |
|---|---|
| Importance of credit history | Credit history is essential for international students in the USA to rent an apartment, buy a car, or even get a job. |
| FICO score | The FICO score, created by the Fair Isaac Corporation, is the most common credit rating system in the US. It predicts an individual's reliability in repaying borrowed funds. |
| VantageScore | VantageScore is another credit scoring system that tends to be quicker than FICO. Both require some history for meaningful data. |
| Social Security Number (SSN) | An SSN is not required to build a credit history, but it makes the process easier. It is issued to those with authorization to work in the US. |
| Individual Taxpayer Identification Number (ITIN) | An ITIN can be obtained for those who are not eligible for an SSN. |
| Credit cards | Credit cards are widely used in the US and are a simple way to build credit history. However, it can be challenging for international students to obtain one without a credit history or SSN/ITIN. |
| Secured credit cards | Secured credit cards require a deposit that becomes the cardholder's credit limit. They are a good option for building credit history. |
| Authorized user | Becoming an authorized user on someone else's credit card account can help build credit history without needing an SSN/ITIN. |
| Bank account | While having a US bank account does not directly impact credit score, it helps manage finances effectively and make timely payments, which are essential for credit building. |
| Utility bills | Paying utility bills on time and setting up monthly transfers for rent, expenses, and utilities demonstrate financial responsibility and build credit history. |
| Student loans | Repaying student loans, such as Prodigy Finance, helps build credit history as the repayments are reported to credit bureaus. |
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What You'll Learn
Get a credit card
Getting a credit card is one of the easiest ways to build credit as an international student in the US. However, it can be difficult to find a company that will issue a credit card to an international student, especially if you don't have a social security number or credit history.
If you are unable to get a credit card in the US, you can ask a trusted friend or family member to add you to their existing credit card as an authorised user. A cardholder can add an eligible user with a social security number or Individual Taxpayer Identification Number (ITIN) to their credit account as an authorised user, without relying on the authorised user's credit score. As an authorised user, you will receive a credit card with your name on it, and any expenses made will be charged to the account owner. Some credit card issuers may report the payment history of the credit card to credit bureaus for both the cardholder and the authorised user, allowing the authorised user to build their credit score with every on-time payment.
If you are planning to stay in the US after getting your degree, it is important to start building your credit score in the US as soon as possible. The length of your overall credit history is a primary factor in getting a higher credit score. You can usually use credit cards issued in your native country that allow purchases in the US, but your credit use on those cards will not contribute to your US credit score. Your credit history cannot be reported until you open a credit account in the US. You may also be subject to international transaction fees when using a foreign credit card in the US.
If you are not eligible for a social security number, you can apply for an ITIN instead. Approval for an SSN can take up to four weeks, and an ITIN can take seven weeks, so it is best to apply for these as soon as you determine which form of ID you are eligible for. You can then use your SSN or ITIN to apply for a US student credit card. Some US student credit cards only require your passport.
Secured credit cards are another option for international students without a US credit history. Secured cards require a deposit that becomes the cardholder's credit limit (usually at least a couple of hundred dollars). The card can be used like any other credit card to make purchases that don't exceed the credit limit. Monthly payments will be reported to one of the major credit bureaus, and cardholders should keep their credit utilisation low and make on-time payments to build their credit scores. Most secured credit cards require an SSN or ITIN to apply.
You may want to check out the Capital One Newcomers Card, which is designed specifically for consumers in your situation. The card offers 1% cash back, has no annual fee, and doesn't charge foreign transaction fees.
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Make regular payments
Making regular payments on time is a key factor in building a credit history as an international student in the US. This is because your credit score is a reflection of your payment behaviour. Each time you make a payment on a credit card, loan, or utility bill, this information contributes to your credit history.
If you are renting a property, you will have utility bills to pay, such as gas, electricity, phone, and internet. You can set up monthly transfers from your bank account to ensure these bills are always paid on time. Making regular, timely payments on all your utilities is a great way to prove to lenders that you are responsible and will be a suitable applicant for a loan or credit card. You can request proof of your payments over the past months or years, which many credit providers will accept as supporting evidence of your payment background.
It is also important to make regular payments on any loans you may have. Prodigy Finance, for example, reports loan repayments to Experian in the US and TransUnion in the UK. Credit cards are another way to build credit, but it can be difficult for international students to obtain one. One option is to apply for a secured credit card, which requires a deposit that becomes the cardholder's credit limit. Monthly payments on these cards will be reported to a major credit bureau, and making on-time payments will help build your credit score.
While it is not necessary to have an SSN to build credit in the US, it does make the process easier. If you have authorisation to work in the US, you will be issued an SSN, which you can use to apply for a US student credit card. You can also apply for credit cards that only require your passport or act as an authorised user on an existing US credit account.
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Pay utility bills
As an international student in the US, you may be renting a property with housemates or living on your own. This means you will have to pay utility bills—gas, electric, phone, and internet. Paying utility bills can help you build your credit history and prove to lenders that you are responsible for your payments. Here are some ways to build your credit history by paying utility bills:
- Set up monthly transfers from your bank account for rent, expenses, and utilities to ensure they are always paid on time. Making regular payments on your utilities is a way to prove to lenders that you are a suitable applicant for a loan or credit option.
- Request proof of your payments over the months or years for each of your utility bills. Many credit providers are beginning to accept this as supporting evidence of your payment background for your loan or credit application.
- Enroll in a service like Experian Boost, which allows you to include other bills in your credit history. Experian Boost can improve your credit score by factoring in your on-time utility and cell phone payments.
- If you are looking to buy a house or move to a new location, your good utility payment history can help you avoid paying a deposit for your utilities. This is called a Letter of Credit Deposit Waiver.
It is important to note that utility bills typically have a minimal impact on improving your credit score. Utility companies usually do not report good payment history to credit bureaus. However, if you become delinquent in paying your utility bills, the utility companies could report the late payments, which can negatively impact your credit score.
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Establish a bank account
Establishing a bank account is a critical step in building your credit profile in the US. While having a US bank account as an international student won't directly improve your credit score, it is an essential foundation for effective financial management and timely payments. Here are some key considerations and steps to establishing a bank account:
Selecting a Bank or Credit Union
When choosing a financial institution, it's important to consider your priorities and ask yourself some key questions. For example, you may want to research the different account options, fees, and requirements of various banks or credit unions. Understanding the terms and conditions of each account offering is crucial to making an informed decision.
Checking or Savings Account
You can open either a checking or savings account, depending on your needs and preferences. A checking account provides easy access to your funds and is suitable for day-to-day transactions. On the other hand, a savings account typically earns interest on your deposits and is ideal for building up savings over time.
Avoiding Overdrafts
Once you've opened your account, it's essential to manage your balance carefully. Avoiding overdrawing your account is crucial, as this can negatively impact your US credit history. Ensure you keep track of your expenses and maintain a positive balance to establish a positive financial record.
Building a Relationship
As you maintain your bank account, you are signalling financial stability to the institution. This can help you develop a relationship with the bank or credit union. Over time, this relationship can make it easier to secure other financial products, such as credit cards or loans, within the same institution.
Securing a Credit Card
While not directly related to your bank account, establishing a credit card with the same financial institution can be a natural next step. A credit card is a powerful tool for building your credit score, and having a positive relationship with your bank may increase your chances of approval.
Responsible Financial Management
Remember that responsible financial management is key. Pay your bills on time, monitor your expenses, and maintain a good standing with your bank. This will reflect well on your overall financial profile and set a strong foundation for building your credit history in the US.
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Apply for a loan
As an international student, you may not have a credit score in the US, but you can start building one. A credit score is a three-digit number that indicates to lenders how financially reliable you are. The higher your score, the more likely you are to pay back loans on time.
If you are applying for a loan as an international student with no credit history, you may have to pay an additional fee upfront or find someone to co-sign with you (usually a US citizen). A co-signer will be held responsible for your debt if you don't pay your bills, so it's important to ensure that they understand this.
To build your credit score, you could apply for a credit-builder loan (also known as a starter loan). These loans are specifically designed to help you establish a credit history. You could also apply for a secured loan, which requires you to put down a cash deposit as collateral.
Another way to build your credit score is to open a checking or savings account with a bank or credit union. As you develop a relationship with the financial institution, you signal financial stability, which may help you secure a loan in the future.
Additionally, you can use your SSN/ITIN or passport to apply for a US student credit card. Having a credit card will help your credit score, and you can build your score further by making regular, timely payments.
It's important to start building your credit score as early as possible, as the length of your credit history is a primary factor in achieving a higher score.
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Frequently asked questions
Credit history plays a significant role in establishing yourself financially in the USA. Without a credit history, you may find it difficult to rent an apartment, buy a car, or even get a job.
One of the easiest ways to build credit as an international student in the USA is by using a credit card responsibly. Other ways include paying utility bills on time, paying off student loans, and opening a checking or savings account with a bank or credit union.
Getting approved for a credit card as an international student can be difficult. However, some options include applying for a secured credit card, using a co-signer, or becoming an authorized user on someone else's credit card account.
You can check your credit score for free using tools such as Credit Karma or NerdWallet.
