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How to Build Credit When You’re New to the U.S.A.

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Sarah met her boyfriend Tim on vacation. After a year of long distance dating, she decided to relocate to be closer to him. But her move was more complicated than most, since she was moving from Canada to the U.S.

As a nurse, she was able to find work here fairly easily. She then opened a bank account, but when she tried to get a credit card from her bank, she was turned down due to lack of a credit history. Although she had established some credit in Canada, none of that showed up in U.S. credit reporting agencies’ files.

Fortunately, Tim works for Credit.com, so she knew who to ask for help! We will be tracking Sarah’s progress as she builds her credit history here in the U.S. We are hoping her experience will be helpful to other noncitizens as they build credit.

The first thing Sarah needs is a Social Security number. As we pointed out in a previous article, How to Build Credit if You Are New to the United States, it’s very difficult to establish credit without one. But the Social Security Administration (SSA) won’t give you one just for the purpose of building credit. SSA states on its website, “Generally, only noncitizens authorized to work in the United States by the Department of Homeland Security (DHS) can get a Social Security number.”

It goes on to explain that you can apply for a Social Security number and card by completing the application (Form SS-5); and providing documents proving U.S. citizenship or immigration status [including Department of Homeland Security (DHS) permission to work in the United States]; Age; and Identity.

According to Atlanta immigration attorney Marshall Cohen, some types of visas automatically allow noncitizens to work in the US; for example, the L1A intercompany transfer used by someone whose employer transfers them to work in the U.S. full-time or part-time.

Otherwise, noncitizens need to get an employment authorization document which they can show to employers to document that they are able to work legally in the United States. “With an employment authorization document you can’t work until you have that card,” he says. However, once someone is authorized to work, it shouldn’t take too long get a SSN. If there is a hold up, it will likely be “when the SSA has to check a database with immigration.”

Sarah got a Social Security number earlier this year so on that front, she’s good to go.

Her next step is to get her first credit account. Since Sarah has no credit history here, that first card may be tough to get. I suggested Sarah get a secured card. With a secured card, she will place a security deposit with the issuer and get a card with a small credit line (most likely the same as the deposit amount). As long as the issuer reports payments to each of the three major credit reporting agencies — Equifax, Experian and TransUnion — she will begin to build a credit history.

Sarah doesn’t know much about how secured cards work, and asked me whether she should pay the minimum due each month or pay the bill in full. I suggest that she use the card somewhat sparingly, because it’s best for her credit to keep her balances well below her credit limits. I also suggest she pays the bill off in full by the due date to avoid interest charges. You don’t get extra credit, so to speak, for carrying a balance.

Sarah showed me the application for her bank’s secured card, which looks competitive. She can either start with that card or shop for a secured card at Credit.com. Either way, she should get her free credit score through Credit.com’s Credit Report Card about 60 days after she pays her first bill on the secured card. By then, the issuer should have reported the account and a score should be generated. It won’t be a high score to begin with, but she can monitor her progress each month using the Credit Report Card.

We’ll follow up with Sarah to see what kinds of results she’s achieved, as well as answer additional questions that may have arisen.

Image: Jeff Kubina, via Flickr

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