How Credit-Invisible Immigrants Can Gain Access to Credit
by Lyle Daly | Updated Aug. 12, 2021 - First published on April 11, 2020
If you've come to the United States and you're credit invisible, there are plenty of ways to start building your credit file.
For U.S. immigrants, perhaps the most difficult financial challenge is gaining access to credit. There are even some consumers who have lived in the States their entire lives who don't fully understand credit scores or how to build credit. And it's more confusing if you've just arrived in the country and are learning about these concepts for the first time.
A lack of credit is a huge hurdle that can make it difficult for immigrants to find a place to live, open a credit card, or take out loans. To build your credit and get past this issue, you need to establish a payment history by having on-time bill payments reported to the U.S. credit bureaus. This improves your credit history and your credit score, which is a three-digit representation of how good your credit is.
The most common ways to build a payment history are through regular, on-time loan or credit card payments, but it can be difficult to qualify for those when you're credit invisible. Fortunately, there are still many ways to improve your credit if you're in this situation.
Lending circles through nonprofit groups
The traditional immigrant lending circle involves a group of people contributing a small amount every month so that one member of the group can make a large purchase. For example, a group of 11 people could decide on a contribution amount of $20 per month. Ten members would contribute that $20, and the remaining member could spend the $200. The recipient changes each month so that it's fair to everyone.
Several immigrant-focused nonprofit groups have set up their own lending circles wherein activity is reported to all three credit bureaus, allowing participants to build credit.
Secured credit cards
Secured credit cards require you to pay a deposit to open an account. Your security deposit will often be equal to your starting credit limit.
Because you're paying a deposit, there's far less risk involved for the credit card company, which also means that you're more likely to be approved, even if you don't have a credit history. If you use the card regularly and pay the bill on time, it will improve your credit score.
As the name suggests, a credit-builder loan is designed to help you build credit. You typically don't receive the loan amount up front. Instead, the lender deposits it into a savings account, you make payments every month that are reported to the credit bureaus, and you receive the money in the account as soon as you've paid in full.
This type of loan is most common with credit unions and smaller banks, so you may want to check with local banks in your area.
Store credit cards
Quite a few retailers offer their own credit cards, called store cards, that can only be used in their stores. One big benefit these cards offer is that they tend to have more relaxed application requirements, and you may be able to get one even with a low or nonexistent credit score.
Store credit cards aren't the best for long-term use, because their benefits are usually subpar and they have higher-than-average APRs. But they can be helpful for people who are just starting to build their credit history.
Use your international credit report through Nova Credit
Nova Credit is a company that translates a consumer's international credit history to a U.S. credit score so that the consumer can apply for a U.S. credit card.
This service only works for immigrants from certain countries, but Nova Credit is working to add more. If you're from an eligible country, you can pick a credit card on the Nova Credit site and apply for it there. There are many popular credit cards available, including several American Express cards, because American Express partnered with Nova Credit in 2019.
American Express Global Card Relationship
If you already have an American Express card in your home country, then you may be able to apply for one of its U.S. cards through the American Express Global Card Relationship program. Because you have an account history with American Express, it will use that information to decide whether to approve your application. Assuming you've been a responsible cardholder, it's likely that you can get a card.
A few credit card companies have found alternative methods for evaluating applicants without a credit history. This usually requires you to connect your bank account during the application process. The credit card company can then look at your monthly income, expenses, and bill payments.
Find a cosigner
A cosigner can assist you in getting a credit card or loan that you wouldn't qualify for on your own. During the application process, the creditor will base its decision on your cosigner's financial information and credit history.
It can be difficult to find someone who is willing to cosign, because that person assumes the risk if you don't make your payments. Their credit could be damaged, and they'd be responsible for the debt. If you can find someone to help you out, make sure you always pay on time so that they don't regret their decision.
Apply for a student credit card or loan
Immigrants who are studying in the United States can build credit by applying for either a student credit card or loan. Because these are intended for college students, it's possible to get approved without any credit. It helps if you have any income, especially when applying for a student credit card.
Your first steps toward excellent credit
Credit files and credit scores may be a lot to take in, but there is good news for U.S. immigrants. You have more ways than ever before to build credit at little to no cost. All you need to do is choose the option above that you like the most, and you'll be starting your journey toward an excellent credit score.
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