How international students and immigrants can get a credit card
Getting a credit card can be more difficult for newcomers to the US, but it's not impossible.
A customer holds out a credit card for payment in New York's Times Square.
Richard Drew/AP/File
If she were applying for a credit card in her native India, Samata听Sirsikar would have won approval easily. She had a good job with an international company and听a solid听record of responsible credit use. But when Sirsikar moved to the United States in 2015 to pursue a master鈥檚 degree at San Jose State University, her positive credit history didn鈥檛 follow her. She was able to open a bank account that had a debit card, but she got turned down for a credit card with the same bank.
Sirsikar听couldn鈥檛 get a credit account in the U.S.听because she had no U.S. credit history. But the only way to build a U.S. credit history is to get a credit account here.
If听you鈥檙e an international student or a new immigrant, you may already have encountered this conundrum. Getting a credit card can be more difficult for newcomers to the U.S., but there is a way. The path to building credit includes:
- Understanding the importance of building credit
- Building credit with a secured credit card
- Exploring听alternatives if you can鈥檛 get a secured card
- Making the most of your first credit card
The importance of building credit
Your credit history shows how you鈥檝e handled credit in the past. It forms the basis of your credit score, and lenders use it to gauge how risky it would be to lend you money. If lenders can鈥檛 check your history with one of the three major U.S. credit bureaus, they鈥檒l be reluctant to听extend credit to you.听If you can manage to build a strong history, though, you鈥檒l be able to borrow money when you need to and get good interest rates and favorable terms.
The problem for newcomers is that any credit history they鈥檝e built in their native country doesn鈥檛 follow them to the United States.听Rod Griffin,听director of public education at the Experian credit bureau, says听financial institutions in other countries don鈥檛 report information to the U.S.-based bureaus that compile credit reports.
鈥淭hey鈥檇 have to comply with all our U.S. credit reporting laws in order to report that information,鈥� he says. But regulations are so different in other countries that it鈥檚 impossible to simply transfer the听credit files of new immigrants or international students. That means new arrivals in this country are essentially starting from zero when it comes to building credit.
Even if you never plan to borrow any money, building credit is important. Landlords commonly look at credit history when you apply to rent an apartment, so finding housing is much harder if you have no credit history. Employers may use credit checks to determine how reliable you are, and so might insurance companies and utility companies.
Even if you plan to return to your home country when you finish your degree or complete your work contract,听it鈥檚 not a bad idea to build credit now to keep your options open.
Building credit with a secured card
鈥淭o establish a credit history, you have to have a credit account opened in your name,鈥� Griffin says. 鈥淚t鈥檚 really as simple as that.鈥�
Simple, but not necessarily easy. Getting that first account can be tough. Americans looking to build credit can use secured credit cards, which require cardholders to pay a security deposit to protect the lender in case of default. These cards can be a good option for people new to this country as well, but issuers may still want to see a few basic things before they鈥檒l allow you to open an account.
You may need:
- A permanent address.听Lenders want to know they鈥檒l be able to find you if necessary. Sirsikar says she plans to apply for a credit card again now that she has a permanent address.
- A taxpayer ID听number.听You听, but it helps to get an听. This is a federal ID number that takes the place of a Social Security number for people who aren鈥檛 eligible for Social Security benefits. In general, only U.S. citizens and permanent residents can get a Social Security number.
- A job.听Lenders want to see that you have income to pay back money you borrow on your credit card.
- A bank account.听Even credit card issuers that welcome international students (more on that below) want to know you have a bank account you can use to pay your credit card bills.
If you have all of these things,听you may be ready to apply for a secured credit card. But听? There are a few other things you can try.
Alternatives for getting a credit card
There are a few other avenues you can explore if you鈥檙e having trouble getting approved for a credit card in the U.S.
Use a credit card from back home.听If you don鈥檛 need a credit card for day-to-day spending, you may be able to use a card from your home country just for emergencies. That鈥檚 what Mexican citizen Gerardo Cedillo does. Cedillo is an undergraduate at the University of Pennsylvania in Philadelphia, studying听materials engineering and chemistry. He opened an American bank account with a debit card, but he uses a credit card linked to his parents鈥� account听as a fallback. He doesn鈥檛 like to use it regularly, since the card offers a poor听exchange rate between听dollars and pesos, but his debit card works for routine spending.
Take advantage of听a relationship with an international bank.听If you or your family have accounts with an international bank in your home country, you may be able to open an account with the same bank here in the United States. Such a bank may be more willing to extend credit to you, since you鈥檝e proved yourself as a customer already. For example, Citibank offers听听for customers who are moving to the U.S. from elsewhere.
Stick with a debit card.听鈥淧retty much every international student gets a debit card,鈥� Cedillo says. Debit cards don鈥檛 build your credit history, but they听are generally accepted at any store that takes听credit cards. Some transactions, like renting a car, can be more difficult with a debit card, but it鈥檚听better than having no plastic.
Apply for a credit card aimed at new immigrants.听A听handful of credit card products cater to international citizens.听听offers a credit card for international students, available now.听听hopes to begin offering credit cards to both students and international workers by September. Both companies will report credit card activity to Experian, Equifax and TransUnion. Having a credit file with these three credit bureaus is necessary if you want to build credit, so make sure any credit card you consider reports your account activity.听.
Get a co-signer.听This may be challenging if you鈥檙e new to the country and don鈥檛 have much of a support system. But if you do have a relative or close friend who has been in the U.S. longer than you have, it may be possible to get that person听to co-sign for a credit card. A co-signer is someone who agrees to be responsible for the debt if you don鈥檛 pay it. Check out our听听of credit card issuers that allow co-signers.
Build credit through renting first.听If you rent an apartment or a house, you鈥檙e making one very important payment every month. Some landlords report tenants鈥� payment history to the credit bureaus. The credit bureaus will in turn create a file to document your rent payments, which听is half the battle when you鈥檙e starting with no credit history. Even the credit bureaus are excited about the idea of using rent payments to build credit. 鈥淲e think it鈥檚 a very important tool,鈥� says听Experian鈥檚 Griffin. " In terms of real impact, rent is proving to be very, very effective.鈥�
Making the most of your first credit card
Your first card should help you move forward on your credit-building path听without draining your bank account with excess fees. Among the questions you should ask of any card you鈥檙e considering:
Does it听report account activity to the credit bureaus?听This is the most important thing to ask any credit card company that offers to give you an account. Your main goal at this time should be to get a credit file in this country so you can begin adding positive history to that file. If you get a loan or a credit card and the issuer doesn鈥檛 report to the credit bureaus, your responsible use of that credit doesn鈥檛 count in your favor.
Are the fees reasonable?听Unfortunately, some companies prey on vulnerable new immigrants and others with no credit by charging exorbitant fees for their products. Annual fees, balance transfer fees and foreign transaction fees, while not fun to pay, are normal, as long as they鈥檙e reasonable. What鈥檚 reasonable?听No more than $40 for an annual fee, 3% to 5% for balance transfers and 3% for foreign transactions. Avoid products that charge steep 鈥渁ctivation鈥� fees just to open the account.
When will you be able to move to a traditional credit card?听If you select a credit card that requires a security deposit, try to find one that will allow you to transition to an unsecured product in the future without opening a new account. Every new account you open could lower your credit score temporarily, so keeping your original account open is better when you鈥檙e just starting to gain ground in the American credit system.
Once you do get your first credit card, using it wisely to build credit is up to you. The formula is simple: Use the card regularly to make small purchases, keep your balance low relative to your available credit, and never, ever pay late. Do that over time, and your American credit history will be just as strong as the one you left behind when you moved here.
Virginia C. McGuire is a staff writer at听NerdWallet, a personal finance website. Email:听virginia@. Twitter:听.
This article first appeared at听.