Establishing credit history

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If you are a foreigner like me that has come to US to work you’ll very soon notice that you will be paying a lot extra for everything because you don’t any credit history. For example I had to pay extra security deposit on my apartment, gas, electricity and even get a non-prepaid phone. All that totalled about $5000 which is a pretty huge chunck of cash that your not going to get any intrest on.

That wasn’t even the worst. The worst was when I wanted to get a car. First I thought about leasing but that was completely out of the question so my second choise was to buy but I wanted a new car as I had gotten used to driving only new cars. I found a dealer that was willing to work with me and got me a financing after I put down over $10.000.

Now doing all that and getting the financing did actually help me quickly raise my credit score to 720 which is considered good but not exellent. I’ve also taken a secured credit card from Capital One with $400 limit and about 6 months ago I took Costco True Rewards card from American Express and for that I got $2000 limit. That’s still far from my 10.000 EUR or about $13.000 USD limit Visa Gold that I’ve had for years from my bank back in my home country, Finland.

So here’s what I would recommend all immigrants and non-immigrants do as soon as you get your social security number. You should notice that you won’t be able to get any credit history without SSN. It doesn’t matter whether you are authorized to work or not with it as long as you have the number. So if you are a student with F-1 visa get a job on campus so that you can get a social security number.

  1. Apply for a secured credit card either from your bank or Capital One. (Don’t apply for any regular credit card or store cards as you will be declined and you’ll get a hard query in your credit report). Put what ever you can on the card such as $300. This will be your credit limit.
  2. Use the card every month but never go over 30% of your credit limit (with $300 limit it would be $100)
  3. Always pay the full balance on time every time no exceptions.
  4. After 6 months to a year get your credit report from all three credit bureaus (Experian, Equifax and TransUnion). You can get this from Freecreditscore.com for instance but remember to cancel the subscription. You might also get this for free as part of your secured credit card so make sure before paying.
  5. Once you have 700+ credit score and if you are shopping for a car or motorcycle take financing on it but pay a significant portion of it up front. Having different types of credit is important but the single most important thing is to always pay on time. Once you have that loan and you’ve made your first payment double check your score. It might take a small hit initially but it should bounce back in few months.
  6. Once you have that stable 700+ credit score you should also take another credit card but this time a regular one. I recommend getting the Costco American Express because there’s no yearly fee other than your Costco membership and you get cash back even from Costco not to mention all the American Express benefits.