Establishing Credit for Immigrants

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Establishing Credit for Immigrants

 

 

     When someone is new to the country, many times they are seeking their own personal American dream. This may include a lot of things, but often times, it involves home ownership.  Immigrants legally living and working in the US can obtain financing through many of the same channels and with the same loan terms that US citizens have available, but one step that should be taken before applying for a loan is to establish credit, and achieve a good credit score.  While many times people move to the US for work and may have Getting US Credit as an immigrantstrong income, assets to use for a down payment and closing costs, and a great payment history in their native country, there is still a huge barrier in the form of a lack of FICO score.  

 

     Generally, credit history doesn't transfer to the US credit bureaus (the 3 main ones being Experian, Equifax, and Transunion), so many times immigrants will have to start from scratch.  Here are 10 ways that starting from scratch can be made less difficult, and using these methods will ensure someone not only obtains a credit score, but creates a FICO score that lenders view as excellent so that rates and terms are favorable to the borrower.

 

 

1) Act Quickly

 

     Once an individual begins establishing credit through opening accounts, it can take 6 months or longer for the credit bureaus to register credit scores that lenders will use to determine eligibility for financing, so it's important that someone new to the country gets started as soon as possible so that when they need financing, they're able to get it.

 

 

2) Obtain a Social Security Number

 

     While the social security administration won't give out a social security number simply for someone to establish credit, getting credit is much easier once a social security number is obtained.  If an immigrant has been approved to legally work in the US through the Department of Homeland Security, they should apply for a social security number by filling out an application/form SS-5.  

 

 

3) Have your rent reported

 

     If you're renting or planning to rent a home, ask if your landlord or property management company participates with Experian's RentBureau program.  This program will report your rental history to the credit bureau, helping to establish a credit score.  If where you live doesn't participate, don't fret, there are more ways to establish credit with no history!

 

 

4) Obtain a secured credit card

 

     A secured credit card is one of the best, and easiest ways for someone with no credit history to start building a credit profile.  With a secured card, a borrower uses their own funds to create a balance which they can then borrow against.  It is prudent to use the secured card, and then pay off most or all of the balance, building credit while avoiding interest.  

 

     It is important to make sure that when opening a secured card, the payment history will be reported to at least 2 (preferably all 3) credit bureaus.  One can find options for a secured card through banks, or online - but keep in mind that cards come in all different terms, so it's important to shop for the right option, and read all of the terms of the secured card.

 

 

5) "Piggyback" off of someone else's credit

 

     If you have a relative or spouse that has already established credit, it may be possible to become an authorized user or co-borrower on an account that they have in good standing.  This can be an excellent way to build a great credit score quickly, but be careful - even as a coborrower/cosigner, a late payment made by the primary borrower will also count as a late payment against the coborrower/cosigner, so if you go this route, make sure the person you link up with is someone that has great credit & you can trust that their good payment history will continue.

 

 

6) Open different types of accounts

 

     One factor in having a great credit score is what type of credit you have.  For example, a borrower with multiple credit cards may have a good credit score, but a borrower with various types of credit will have a better chance at a higher credit score.  While using secured cards is a great way to obtain a FICO score, once you have one and credit becomes more readily available, it may be a good idea to look into different types of loans - auto loans or a personal loan, for example, can further increase credit scores if paid on time.

 

 

7) Keep credit balances low/paid off

 

     While it's important to use credit to build a credit score, it's just as important to pay it on time and keep balances low or at $0.  Credit scores are partially based on what's known as "credit availability", and the more available credit you have, the better.  For example, if 2 people have a $1000 credit limit, and one of them carries a balance of $900 and the other carries a balance of $100, the person with the lower balance will have a better FICO score.  A good rule is to at least keep balances lower than 50% of credit limits, but a better strategy is to keep balances at less than 25% of a credit limit to really give credit scores a boost.

 

 

8) Limit the number of open accounts

 

     When building credit, every point counts.  If too many accounts are opened in too short a time period, credit inquiries (the times lenders look into your credit) can reflect poorly on your credit scores.  It's vital to open new accounts, but no more than 3-4 accounts are needed to build a near-perfect FICO score.

 

 

9) Think long-term

 

     When trying to open accounts, seek out accounts that you'll want for the long haul.  "Seasoning", or the length of time an account has been open, is another factor in credit scoring.  New accounts don't help credit scores as much as old ones, so holding onto your credit accounts, even with $0 balances, is a great way to maximize credit scores.

 

 

10) Guard your personal info

 

When obtaining credit, you want to be sure you limit your vulnerability to fraudsters -identity thieves and people that will use your credit for misdeeds.  Keep all of your personal information in a safe place, safely dispose of any account materials, and never freely give out your social security number or account information.  It's not a quick, fun, or easy process to build a great credit history, and your information falling into the wrong hands can ruin all of your hard work almost overnight!

 

 

     By following these steps, you'll be on the right path to great credit, low rates, and friendly lending terms.  If you're an immigrant, once you've got a social security number and a FICO score, you'll enjoy the same lending process as citizens, and the dream of home ownership will be yours for the taking!  When that time comes, reach out to a mortgage lender that will guide you through the process until you get the keys to your new home!

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Re-Blogged 5 times:

Re-Blogged By Re-Blogged At
  1. Lynn B. Friedman 02/23/2016 09:34 AM
  2. Tony and Suzanne Marriott, Associate Brokers 02/23/2016 09:27 PM
  3. Joyce Marsh, Broker Associate 02/24/2016 03:20 AM
  4. Frank Rubi 02/24/2016 07:19 AM
  5. Anna Banana Kruchten, CRS 02/24/2016 08:04 AM
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Ambassador
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Dick Greenberg
New Paradigm Partners LLC - Fort Collins, CO
Northern Colorado Residential Real Estate

Hi John - That's excellent advice, and likely to come in handy in coming years. Thanks!

Feb 24, 2016 08:48 AM #36
Rainmaker
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Dan Derito
Success! Real Estate - Brockton, MA

This is a clear and concise list to follow John.  I'd love to print it out and give to my growing list of newcomer clients.  You can explain it to them, but having a printed list like this is solid reinforcement.

Feb 24, 2016 12:21 PM #37
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Jeff Dowler
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude - Carlsbad

John

These are great ideas for helping immigrants establish credit. Many potential buyers can aprpeciate this, and many ideas are good for those US citizens who don't have any credit. Thanks!

Jeff

Feb 24, 2016 12:27 PM #38
Rainmaker
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Craig Cooper
Chase International Real Estate - Tahoe City, CA
Creating-Preserving-Growing Wealth in Real Estate

Really great information John regardless of who they are. You have developed a comprehensive list of goals and steps that should help anyone establish credit.

Feb 24, 2016 05:32 PM #39
Rainmaker
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Christopher Lotte
Berkshire Hathaway HomeServices Professional Realty - www.TheBuckeyeRealtyTeam.com - Dublin, OH
Central Ohio Realtor, 614-390-9243

Thanks for sharing, Great information John Meussner 

Feb 24, 2016 07:47 PM #40
Rainer
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Ron Aguilar
New American Funding - Saint George, UT
Mortgage & Real Estate Advisor since 1995

John, excellent post. I will bookmark this to share with my fellow Loan Officer's. Thanks for your time...

Feb 24, 2016 09:33 PM #41
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Michael Jacobs
Coldwell Banker Residential Brokerage - Pasadena, CA
Los Angeles Pasadena Area Real Estate 818.516.4393

Hi John -- very thorough explanation.   It's a good reminder that even in our "want it now" society, the best road to success(however that is defined) is with a plan and with consistently improving over time.  

Feb 24, 2016 10:41 PM #42
Rainmaker
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Carolyn Roland-Historic Homes For Sale In Delaware and S. Chester County PA
Patterson-Schwartz Real Estate - Wilmington, DE
Carolyn Roland, GRI, CRS

Thanks John--Great stuff!  I had a buyer who lived in Japan but wanted to buy a house here but all his many credit cards didn't report to our credit bureaus. So he is now opening US cards so he can get a FICO.

Feb 25, 2016 12:41 AM #43
Rainmaker
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Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

I suspect this is a lot harder than it was 10 or 15 years ago.  I remember helping a man from Guatamula when I did lending.  It was actually easy then.

Feb 25, 2016 02:15 AM #44
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Wanda Kubat-Nerdin
Specializing in Residential, Referrals & Relocation | PK Real Estate Utah South - St. George, UT
St. George Area Preferred Residential REALTOR®

Never had any idea there were so many options for immigrants looking to establish credit available John. Thank you for opening my eyes!

Feb 25, 2016 09:59 AM #45
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Belinda Spillman
Aspen Lane Real Estate Colorful Colorado - Aurora, CO
Colorado Living!

Great post.  It is difficult for many new to our country to own a piece of America.  This is a great step by step guide for them.

Feb 26, 2016 02:26 AM #46
Rainmaker
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Lou Ludwig
Ludwig & Associates - Boca Raton, FL
Designations Earned CRB, CRS, CIPS, GRI, SRES, TRC

John

An outstanding post . . . . and information.

Good luck and success.

Lou Ludwig

Feb 26, 2016 12:21 PM #47
Rainmaker
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Lou Ludwig
Ludwig & Associates - Boca Raton, FL
Designations Earned CRB, CRS, CIPS, GRI, SRES, TRC

John

Congratulations on earning the feature for an outstanding post.

Good luck and success.

Lou Ludwig

Feb 26, 2016 12:23 PM #48
Rainmaker
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Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

Good morning John. Outstanding post, you have a very good handle on creating the dream of home ownership for folks that have come to this country.

Feb 26, 2016 06:11 PM #49
Rainer
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DEANNA EARLY - ( NMLS #268590 )
American National Bank and Trust - Smith Mountain Lake, VA
Virginia Mortgage Loan Originator

These are great tips for anyone that needs to build credit including immigrants John Meussner  .   When renting, DON'T depend on the landlord. Keep copies of any lease and all payments such as receipts or cancelled checks to show on time payments for a minimum of 12 months to establish a payment history.

Feb 27, 2016 05:11 PM #50
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Praful Thakkar
Keller Williams Realty - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

John Meussner I have seen many immigrants with a good credit score - their average income is more than average income of an American Family - and they are mostly disciplined when it comes to payments of credit cards.

Culturally, they do not want to carry balance - or have debt.

Feb 28, 2016 12:00 PM #51
Rainmaker
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Wayne and Jean Marie Zuhl
Hallmark Realtors - Clark, NJ
The Last Names You'll Ever Need in Real Estate

Hi John,

This is really valuable information.  Thank you for sharing.

Feb 29, 2016 02:55 AM #52
Rainmaker
253,140
Marti Steele Kilby, CRS
Steele Group Realty - La Mesa, CA
Broker/Owner, San Diego, CA

Great information!  You offered some great tips I hadn't considered.  Thanks.  This will be a good post to bookmark for future reference.

Mar 02, 2016 07:01 AM #53
Rainmaker
783,779
Bob Ratliff
Renowned Realty - Austin, TX
"Sold with Bob"

Hi John, great advice.... I like the one asking the landlord to report their monthly payments and also the secured credit card.... they're all wonderful as usual you really know your business.

Mar 02, 2016 07:42 AM #54
Rainmaker
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Anja Kerstens
Coldwell Banker Residential Brokerage - Morgan Hill, CA
GRI, CDPE, CHS, ASP, Selling Silicon Valley Real

John, this is excellent information for my buyer from Canada.

Mar 03, 2016 08:09 AM #55
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