Lana Oconnell
As an international student in the US, building a credit score is essential to gaining access to financial products, renting an apartment, and even improving job prospects. A credit score is a rating that sums up your financial background and indicates your lending risk. While it can be challenging to establish credit without a prior history, there are several ways to start building a positive credit score. This includes getting a credit card, becoming an authorized user on someone else's credit card, or taking out a credit-builder loan. It's important to use credit responsibly and not overextend yourself financially. Building a good credit score takes time, so it's best to start as soon as possible during your time as an international student in the US.
| Characteristics | Values |
|---|---|
| Credit score | A rating given to your financial background when assessed by a lender |
| FICO score | The most common measurement used to identify your credit rating inside the US |
| Credit-building | Reflects your positive financial behaviour |
| Credit history | The length of your credit history is a primary factor for getting a higher credit score |
| Credit card | Using a credit card responsibly is a simple way to build and maintain a good credit score |
| Social Security Number (SSN) | Having an SSN can make it easier to apply for credit |
| Individual Taxpayer Identification Number (ITIN) | Some credit card issuers allow international students to apply for a credit card using an ITIN instead of an SSN |
| Credit-builder loans | For people without a high credit score, credit-builder loans (also known as starter loans) can help build credit |
| Secured credit cards | A secured credit card is a great option for international students, as it is relatively easy to obtain |
| Payment history | Lenders report your payment history to credit bureaus to create your credit score |
| Credit limit | Ask the card issuer to raise your credit limit if you have the income or liquid assets to support it |
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What You'll Learn
Understand the US credit system
Understanding the US credit system is essential for international students aiming to build their credit. This system revolves around a credit score, which is a rating that assesses an individual's financial background and their eligibility for loans or credit cards. A higher score, typically ranging from 300 to 850, indicates higher financial responsibility and lowers the risk associated with lending money to that person.
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. However, a FICO score is typically unavailable to those without a credit history of at least six months. Other credit bureaus, like Experian, Equifax, and TransUnion, also play a role in evaluating credit history and calculating scores. They consider factors such as payment history, credit utilisation, and the number of recently opened accounts.
To build a solid credit history in the US, international students can start by opening a local bank account, which is critical to establishing a financial profile. Additionally, credit cards are a popular tool for building credit. While getting a credit card as an international student can be challenging, some options include secured credit cards, becoming an authorised user on someone else's card, or applying for student credit cards designed for young college students. These cards often have benefits like no annual fees and cashback rewards.
It's important to use credit cards responsibly, making regular purchases and paying off charges on time to build a positive credit history. International students may also consider taking out loans, such as Prodigy Finance loans, which are reported to credit bureaus, helping establish their creditworthiness. Building credit in the US as an international student takes time and financial management, but it can have enormous benefits in the long run.
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Get a credit card
Credit cards are now used as widely as (if not more than) cash in the US, making it almost obligatory to own one. Getting a credit card as an international student can be difficult, but there are a few options to explore.
Firstly, all foreigners in the US can theoretically be approved for a credit card as long as they have a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN). You can also get a credit card if you know someone willing to add you as an authorized user on their account. This means you'll get your own credit card, and your score will increase faster, as it's typically tied to the primary cardholder's. However, being a co-signer or a primary cardholder with an authorized user can be risky. If you plan to ask someone to fulfill either role, make sure you first have a conversation about your responsibility for the card—for example, how you'll make on-time payments so they don't end up footing your bill.
If you don't have an SSN or ITIN, you can still apply for a secured credit card. A secured credit card requires you to make a deposit (collateral) that acts as your credit line. The deposit "secures" your card because if you can't pay your balance, the credit card company will take your deposit. The card can be used like any other credit card to make purchases that don't exceed the credit limit.
Student credit cards are designed specifically for young college students who are most likely applying for their first credit card. Most student cards have benefits such as no annual fees and some cash-back rewards. However, to qualify for a student credit card, you must have a steady income that's already established and a credit history (or at least a co-signer).
To build your credit with a credit card, use it for your daily purchases and pay off your charges each month or week. This will allow you to have regular use of the card, and steady payments—both of which lenders like to see. To ensure you never miss a payment (and harm your credit score), create an automatic payment for the minimum due each month, then manually pay the difference.
Your university may be able to assist you in getting a credit card. They could instruct you on whether to apply for an SSN or ITIN, and many universities even have special arrangements with banks to make it easier for international students to obtain a credit card.
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Build a financial history
Building a financial history as an international student in the US is important if you want to take out a loan, get a credit card, buy a car, or rent an apartment. Here are some ways to build your financial history:
Get a Credit Card
One of the easiest ways to build credit as an international student in the US is by getting a credit card and using it responsibly. Credit cards are widely used in the US, and having one will help you build and maintain a good credit score. Look for credit cards specifically designed for international students, such as SelfScore, which requires no Social Security Number and has low interest rates. Your university may also have special arrangements with banks to make it easier for international students to obtain a credit card.
Become an Authorized User
If you are unable to get your own credit card, you can build your credit history by becoming an authorized user on someone else's credit card account. This means the primary cardholder authorizes you to use their credit card, and your score will increase as long as they maintain good credit habits.
Open a Local Bank Account
Having a local bank account is critical to establishing your credit profile in the US. Even if your transactions aren't reported to credit bureaus, maintaining an account demonstrates a financial history with that bank. This makes it more likely that the bank will offer you credit in the future.
Pay Your Bills
Putting utility bills in your name can help build a responsible financial history, especially if the utility company reports payments to credit bureaus.
Get a Loan
Taking out a loan can also help build your credit history. However, be cautious and only take out a loan if you truly need it. Prodigy Finance, for example, reports loan repayments to Experian in the United States.
Remember, building credit takes time, and the length of your overall credit history is a primary factor in achieving a higher credit score. Start building your credit history as soon as possible during your time as an international student in the US.
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Explore credit-building loans
As an international student, you may find it difficult to get approved for a loan or credit card in the US. This is because you won't have a US credit score unless you take steps to build one. A secured loan, sometimes called a credit-builder loan, may be an option for you. Here's what you need to know about credit-building loans:
A credit-building loan is a type of secured loan. With this type of loan, you make fixed payments to a lender, who holds the amount you borrow in a bank account until the end of the term. At the end of the term, you get access to the loan amount. The lender reports your payment activity to US credit bureaus, which helps build your credit score. This option may be available to you as an international student without the need for a co-signer.
How to get a credit-building loan
To get a credit-building loan, you may need to shop around for lenders who offer products designed for international students. Some lenders may require you to have a US bank account, while others may not. It's important to do your research and compare loan features, interest rates, and fees. You may also want to consider getting a co-signer who is a US citizen or permanent resident with a good credit score. This can increase your chances of approval and help you get a lower interest rate.
Using a credit-building loan to establish credit
Once you have obtained a credit-building loan, it is important to make regular, timely payments. This will demonstrate your financial responsibility to lenders and help build your credit score. Additionally, consider opening and maintaining a local bank account to establish a financial history with a bank. This may increase your chances of getting credit from that bank in the future.
Other options for building credit
In addition to credit-building loans, there are other ways for international students to build credit. These include getting a credit card designed for international students, becoming an authorized user on someone else's credit card, or taking out a private student loan with a co-signer. Building credit takes time, so it's important to start as soon as possible and maintain positive credit-building activities.
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Maintain a good credit score
Once you have built a credit history, it is important to maintain a good credit score. A good credit score is essential if you plan to remain in the US after your studies. It can make it easier to rent an apartment, buy a car, take out a loan, or even get a job.
The most important aspect of maintaining a good credit score is to always pay on time. You can set up automatic payments for the minimum due each month, and then manually pay the difference. This will ensure you never miss a payment and harm your credit score.
Using a credit card responsibly is a simple way to maintain a good credit score. Credit cards are now widely used in the US, making it almost obligatory to own one. The best way to build credit with a credit card is to use it for daily purchases and pay off your charges regularly. This will allow you to demonstrate regular use of the card and steady payments, which lenders like to see.
You can also maintain a good credit score by building a responsible financial history. One way to do this is to put utility bills in your name if a utility company reports payments to credit bureaus. Another way is to open and maintain a bank account, which will demonstrate a financial history with that bank. They are then more likely to offer you credit in the future.
It is also important to check your credit score, especially before entering into an agreement that requires a credit check. FICO is a commonly used resource to check credit scores, but there are also free options available.
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Frequently asked questions
A credit score is a rating given to your financial background when assessed by a lender. It sums up how much of a financial risk you would be if loaned money. A higher score means better loan terms and lower interest rates.
The best way to build your credit score is by using a credit card responsibly and paying off your charges each month. You can also build credit by taking out a loan, such as Prodigy Finance, and paying it back on time.
You can apply for a credit card using your Individual Taxpayer Identification Number (ITIN) or Social Security Number (SSN). If you don't have either of these, you can become an authorised user on someone else's credit card.
A credit score is important for international students in the US as it can help you secure loans, rent apartments, buy a car, and even improve your job prospects.
