Building Credit As A New Immigrant: How Credit Cards Can Help You

There are nearly 49.5 million immigrants living in the United States as of the 2023 census. If you’re among that number and have recently relocated to the country, you might be surprised to learn how much credit impacts your life here in the land of stars and stripes.

In the United States, establishing good credit history and a good credit score are essential for your financial health. Credit scores can impact many areas of your life—from the cost of your monthly auto insurance premium to your ability to lease an apartment or take out a loan. Your credit history, meanwhile, might even influence whether you can land certain jobs or security clearances.

As a new immigrant however, you may face some unique challenges when you start the credit-building process. Yet it is possible to establish credit as a new immigrant with the right approach. And credit cards may be able to help you reach your credit-building goals faster.

How Credit Cards Can Help You Build Credit as an Immigrant

A well-managed credit card can be one of the most effective ways to establish credit. This fact is true whether you’re a new immigrant or a U.S. citizen who’s trying to build credit for the first time.

Credit cards have the potential to build and improve your credit score in several different ways. When you open a credit card and use it responsibly it might help you:

• Establish positive payment history. FICO® Scores are one of the most popular credit scoring systems in the United States. The majority of your FICO Score—35% to be exact—is determined by the payment history on your credit report. If you open a credit card and always pay it on time, your credit score should benefit from your responsible credit management habits.
• Show a low credit utilization rate on your credit report. The relationship between your credit card limits and balances (called your credit utilization ratio) also has a meaningful impact on your credit score. In fact, credit utilization is one of the primary factors that determines your FICO Score being worth 30%. You should aim to keep your credit card balance low in relation to your credit limit—ideally below 30% of your total credit limit. The best plan is to pay off your full statement balance each month.
• Grow your length of credit history. Another 15% of your FICO Score comes from your length of credit history. Opening a new credit card won’t help you here right away. Yet as the new tradeline on your credit report grows older over time, your ever-increasing average age of credit may cause your credit score to trend upward.
• Add to your mix of credit. FICO bases 10% of your credit score on your credit mix. Adding a credit card to a credit report with no revolving credit adds to your account diversity. The same is true if you add an installment account, like a personal loan or credit builder loan. Having a credit history that shows you have a good track record managing multiple types of accounts can be good for your credit score.

How To Open Your First Credit Card in the U.S.

There are three approaches that may help you open a credit card and add some positive payment history to your American credit reports.

1. Apply for a Credit Card with Your Social Security Number

Depending on your visa status, you may be eligible to receive a Social Security number as a noncitizen. If you’re an immigrant who plans to work in the United States, you can apply for a SSN prior to entering the country. You can also apply for a SSN at a local Social Security office after you arrive.

On top of applying for a SSN, it’s also advisable to open a bank account. From there, getting a credit card should be easier. Yet you still need to be careful to choose the right type of first U.S. credit card, otherwise your application might be denied.

As an immigrant with no previous credit history in the United States, you may want to consider applying for one of the following credit card options.

• Secured credit cards are a type of credit card that you can obtain by providing a security deposit. The size of your deposit typically determines the size of the credit limit you’ll receive on the new account. Qualification tends to be easier with secured cards because your deposit reduces the risk involved for the issuing bank.
• Student credit cards might be a good fit if you’re an international student studying in the United States. These accounts may not require a deposit. But if you’re under 21 years of age or you don’t have enough income to report, you might need a co-signer to qualify for a new account.
• Authorized user status on a friend or family member’s existing credit card could also help you establish credit as a new immigrant.

Whichever approach you choose, it’s critical to make sure the card issuer will report the account to Equifax, TransUnion and Experian, the main credit reporting agencies in the country. If the card issuer doesn’t share account information with all three credit bureaus, or if its credit reporting policy only includes one or two of the credit bureaus, the account may not be an effective way to establish credit history.

2. Use an ITIN To Apply for a Credit Card

If you don’t have a Social Security number, you might be able to open a credit card account with an Individual Taxpayer Identification Number, or ITIN. That move could help you establish a credit file with the three major credit bureaus.

Rod Griffin, Senior Director of Consumer Education and Advocacy with Experian, confirms:

“If a lender approves an application and reports the information to Experian, a credit report will be established, even if there is no SSN. A SSN is not necessary to have a credit report.”

The bad news is that not all credit card issuers will approve your credit card application if you have an ITIN instead of a SSN.

Again, your best bet is to apply for credit cards that feature easier-to-satisfy approval criteria. A premium rewards credit card probably isn’t a good fit in this situation. A secured credit card or a student credit card (if you’re eligible), on the other hand, might work depending on the card issuer’s policy.

If you don’t have an ITIN, you can apply for one with the Internal Revenue Service. You can download Form W-7 on the IRS website to start the process. Upon completion, you can either mail the form (along with confirmation of your identity and foreign status in the U.S.) or you can bring that documentation to an IRS walk-in office. An IRS-authorized Acceptance Agent, like a college, financial institution or accounting firm, might also be able to help you.

Can You Transfer Credit History From Another Country to the U.S.?

If you’ve already established positive credit history in your former country of residence, you might wonder whether you can transfer that information to the United States. But in most cases it’s not possible for your credit history from another country to move with you when you relocate.

There are several reasons why transferring credit history from one country to another typically doesn’t work.

• It might not be legal. Some countries don’t permit the transfer of credit information across borders.
• U.S. credit reporting laws are complicated. Another country might find it impossible to comply with the Fair Credit Reporting Act due to differences in their credit reporting procedures.
• Credit reporting systems are different. For example, some countries include bank account details in the credit histories of consumers. That doesn’t happen in the United States. Furthermore, while the U.S. includes both positive and negative credit history on credit reports, some countries focus only on negative data.

Differences in credit reporting database structures also pose problems that would be difficult to work around.

“It’s a bit like transferring information from a PC to a Mac computer,” says Experian’s Griffin.

These technical issues would make sharing credit information from county to country a problem even if the roadblocks above didn’t exist.

One Potential Option To Hang On To Your History

American Express does offer a limited service for card members who move to select countries called Global Card Relationship. This program allows some current Amex members to sign in to their account and apply for a credit card with the address of the country they are moving to. Amex says they “may use your account history to make a decision on your application” so it’s not a guarantee, but it may be more helpful than starting from scratch. Note that a SSN or ITIN is required.

How Long Does It Take To Establish a Credit Score?

Once you open a credit card that reports to the major credit bureaus, it can still take some time to establish a credit score. To qualify for a FICO Score, you’ll need an account on your credit report that’s been open for at least six months plus an account that’s reported activity in the last six months too. (Note: The authorized user credit card strategy might help speed up the process for you.)

It can be a little easier to qualify for a VantageScore credit score. With VantageScore, you may be eligible for a credit score as soon as an account with activity appears on your credit report.

Bottom Line

When you’re ready to build credit as a new immigrant, it’s okay to start small and work your way up. In fact, the slow and steady approach is probably best.

If you do open a credit card, be sure to follow good credit management practices like paying on time and maintaining a low credit utilization rate. A credit card with a history of late payments or a high balance-to-limit ratio could lead to you establishing a bad credit score instead of a good one.