Posted 05 September 2023
Establishing Credit as an International Student
Whether you are planning to remain in the U.S. after finishing your degree, need to rent an apartment, or are hoping to purchase a vehicle during your time here, establishing a positive credit score will make accomplishing those goals much easier!
Although you may have established a positive credit history at home, the factors that effect a credit score vary in every country. It is a good idea to get a jump-start on establishing your credit as soon as you are able once in the U.S. One of the key factors in creating a good credit score is the length of time you have been responsibly using credit. Even if you are not ready to open an unsecured line of credit or loan just yet, the following steps will assist you in positioning yourself for success once you are ready to start your credit journey.
1. Open a savings and checking account
You can easily build a strong relationship with your credit union or bank by responsibly using your account over time. If you are working, setting up direct deposit is also a great idea. Once you are ready to open a loan or credit card, your lender can more easily see your full financial picture. They will be able to see monthly expenses being reported by other lenders, alongside how responsibly you have used your account.
2. Open a secured credit card
Opening a secured credit card is a great option for international students, as it is relatively easy to obtain. A sum of money, usually equal to the amount that can be charged to the card, is held as collateral for the line of credit. Having the money available in an account offers a low-risk way for your financial institution to help you build credit in the U.S. What makes this option low risk? If you suddenly need to leave the country, but haven’t paid your balance, or if you begin to miss payments, your financial institution can apply the funds from your collateral account to repay your existing balance.
Once you’ve obtained enough money to place into your collateral account, you can be issued and begin using your secured credit card. As you use and pay off the card, the payments are reported to the credit bureaus, helping to establish a positive payment history. Once you have built a strong credit foundation, it is often easier to transition to an unsecured line of credit.
3. Have your rent payments reported
Most off-campus housing options now have the ability to report your monthly rent payments to the credit bureaus. Your rent payment is usually your largest monthly expense, so it’s important to make those payments count! If your rental company does not normally report payments, it may be beneficial to ask if they can help you establish a healthy financial foundation by having these payments reported. This is another great way to quickly build credit without taking out a loan.
4. Obtain a free copy of your credit report every year.
Obtaining a free copy of your credit report each year is a great way to monitor your score, along with ensuring that all existing reporting is accurate. A copy of each credit report can be obtained by visiting www.anualcreditreport.com.
While credit can be built in a short amount of time, it can also be negatively impacted by missed payments, a large number of applications for new credit in a short timeframe, or high credit card balances. Setting up automatic payments, maintaining low credit card balances, not applying for multiple loans in a short period of time, and checking your credit report regularly for accuracy will help to ensure your credit score stays on a positive trajectory, helping you to obtain your financial goals during your time in the U.S.