Building credit in the United States

Activities that U.S. citizens take for granted, such as applying for a new job or purchasing insurance, are more challenging for immigrants due to their lack of a U.S.-based credit history. Those who lack a credit history are a "wild card" for banks since banks do not have access to a credit history with which to assess the immigrant's risk level.

Your credit report and scores will not transfer to another country when you move. Even countries that share certain credit bureaus, such as Canada and the U.S., do not transfer credit records from one country's system to the other. Immigrants to the U.S. must build credit from scratch to qualify for credit-based services.

1. Apply for a secured credit card. Because secured credit cards are specifically designed for those with poor credit or no credit, approval often isn't contingent on a credit check. You must make a cash deposit which then serves as your spending limit on the card. When the credit card company reports the account to the credit bureaus, the credit bureaus will create a file in your name.

2. Ask a loved one with established credit to add you to a credit card account as an authorized user. The cardholder's credit company will then add the account to your credit report. Provided he pays his credit card bills on time, the positive payment history associated with the credit card will help boost your new credit rating.

3. Borrow against your own money. You can apply for a personal loan with your bank and, provided the money in your bank account meets or exceeds the loan amount, you can use your bank account as collateral. By placing a hold on your bank account for the total loan balance the bank eliminates its risk of financial loss. This often renders an extensive credit history unnecessary.

4. Pay your creditors on time. Creditors report missed payments to the credit bureaus and they show up on your credit report. Not only do missed payment notations leave you with a lower credit score, they signify that you pose a higher than average lending risk -- leaving you paying your creditors higher interest charges than an individual with untarnished credit.

The following tips will tell you how to use the secured credit card to build your credit and finally get an unsecured credit card.

1. Shop around, but don't apply for more than one at a time. The more credit inquiries on your report, the worse it looks to potential creditors. Credit cards, secured or not, come in a wide variety of terms. Find one with a low, non-fluctuating Annual Percentage Rate, as well as a low Periodic Rate. Beware of introductory offers that start with low rates and jump after a short time to unreasonably high fees. Remember, the fine print on the credit card offer is more telling than the splashy headline.

2. Start with a low available balance. Put only what you can afford into the card. Add funds to a newly obtained card only after your bills are paid. You can begin improving bad credit with a secured card starting with available funds as low as $25 or $50. If the secured card offer you're considering requires a higher deposit than you can reasonably afford, pass it up and keep looking.

3. Use no more than half of the available balance. Even though you have access to the funds, the idea is to use but not drain the card. Credit agencies will look at the card's usage, including available credit. If you pull out the available balance almost as quickly as you put it in, your credit score will not improve.

4. Pay bills with the card only when you can immediately replace the funds. Always pay credit cards, secured or not, in full before the due date. The best way to accomplish this is by not using the card unless you have replacement funds. If you use the card without the ability to replace the funds, you're simply hoping the money will appear within 30 days. Be proactive, not reactive, to keep your credit repair plan on track.

5. After several months of re-setting your secured card without incident, consider depositing additional funds to the card. Repeat Steps 3 and 4 with the higher credit limit. This improves your credit score without allowing you in over your head.

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