A Credit-Building Guide for Immigrants

New to the U.S. and new to credit? Start here.


Martin Brablec

Decorative, illustration of many hands reaching up toward an arch-shaped graph | By Kyle Duong

The FICO credit score is about as American as baseball and apple pie. In the United States, lenders, or financial institutions that lend money to people with the expectation that they’ll pay back the loan, use credit scores to evaluate the risk in lending someone money (see next section for more). 

Now, more than 30 years after the nationwide implementation of the FICO credit score, the most commonly used credit score in the United States, very few nations possess a credit-tracking system that even remotely resembles the American model. Because of its unique American-ness, many immigrants to the United States have no idea credit scores even exist — that is, until they get rejected for housing or loans for unknown reasons.

Your credit score must be built from nothing. If you’re new to this country, this can lengthen the already difficult process of finding a place to stay, getting a job, and buying a car — all of which may require a credit record (let alone a good one) in the first place. 

The good news is that there is a clearly defined pathway to achieving good credit. This article breaks down the twists, turns, and potential pitfalls immigrants may face while building their credit scores.

What is a Credit Score?

In the olden days, lenders had to rely on word-of-mouth when determining a borrower’s creditworthiness. If a borrower had a track record of missing payments, lenders would often deny their attempts to obtain loans. On the other hand, a borrower who consistently paid their debts would be given preferential treatment. 

Lenders operated on this model for generations, but it wasn’t without its shortfalls. Untrustworthy people could commit fraud by quickly ingratiating themselves with the community, borrowing a sum of money, and leaving town before the lender could collect — and they would do this in different places, again and again. 

Lenders were also far from perfect. In fact, many had a long history of using discriminatory practices to prohibit specific groups of people from obtaining credit — oftentimes for no defined reason.

Then, in 1956, Fair, Issac and Company (FICO) addressed these problems with the invention of the credit score. The FICO credit score sought to provide a standardized, impartial rating to help lenders determine each borrower’s creditworthiness. Over the next decades, the FICO score underwent a series of small changes and fixes until 1989, when the current version of the FICO credit score came into effect. 

The FICO credit score factors in a borrower’s payment history, amounts owed, length of credit history, types of credit used, and recent credit inquiries into an algorithm, which subsequently spits out a number between 300 and 850. This resulting figure is a borrower’s credit score.

Today, credit scores are maintained by three separate reporting agencies: Equifax, Experian, and Trans Union Corp. Then there is the VantageScore, which is a combined credit score jointly developed by the three agencies.

Photo from New York Public Library •

Why Should You Build Credit?

Good credit is a necessity for achieving financial stability in American society. Let’s face it — even relatively well-off Americans cannot make large purchases, such as homes or cars, without credit. A good credit score is vital for obtaining lender approval for home loans, auto loans, and more. 

While it used to be possible to rent an apartment while building your credit score, this is becoming difficult. Many property companies and landlords will only grant rentals to prospective tenants with good credit. Those new to the United States should begin building credit as soon as possible in order to optimize the process of securing housing and avoiding setbacks.

How Can You Start Building Credit?

An important step in the journey to achieving good credit is getting a credit card. When choosing the right credit card, it is crucial to be aware of cards that come with a lot of fees (also known as fee-harvester cards). Fee-harvester cards often target people trying to build credit scores, including young adults and immigrants. They tend to convince borrowers by offering easy entry, false promises, and dense paperwork to hide fines, fees, and stipulations. Unsuspecting victims often find themselves blindsided by excessive charges and interest, with limited ways to escape due to complicated terms and conditions.

Luckily, some creditors, such as Mission Lane®, work with (not against) those just beginning their credit journey. Mission Lane tries to make the credit building journey as pleasant and straightforward as possible, with clear terms and conditions, friendly (and speedy) customer service, and no startup fee, monthly fees, or over-the-limit fees. Some of our cards do have an annual membership fee.

Once you obtain your credit card, start small! Making small purchases ensures that you will stay under your credit limit, which will in turn help raise your credit score. Make sure you pay your credit card bill on time, every time; failure to pay on time will signal you are a greater credit risk, and may limit your ability to build your credit over time.

Photo by Tim Evans •

What Should You Avoid when Building Credit?

While it may be tempting to use your new credit card for big purchases, the best way to begin your credit journey is to start small so you can easily pay back what you spend. Make sure you pay your credit card bill on time, every time; failure to pay on time will signal you are a greater credit risk, and may limit your ability to build your credit over time.

Not only will spending small provide a solid, early credit baseline, but it will also ensure you stay well under your credit limit. If you exceed your credit limit threshold, you risk stalling or even lowering your credit score. In fact, many experts recommend staying under 30% of your monthly credit limit to maximize credit score growth.

In addition, if you are able, try to pay all of your bills on time — not just your credit card bill. Unpaid doctor’s bills, utility bills, and other bills will likely get sold to private collection agencies. These agencies may open hard inquiries into your account to gain insight into your past and future financial behavior. When looking at credit reports, many lenders view the presence of hard inquiries as a red flag. Because of this, hard inquiries can negatively affect your credit score.

The age of your accounts is another critical factor in determining your credit score. Even if you rarely use your credit card, keeping your credit accounts open and active may help build your score over time.

Finally, avoid payday and title loans. While they are easy to acquire and especially attractive to those without solid credit histories, payday and title loans can also be fee harvesters, and may have exorbitant hidden rates, fees, and other limiting terms and conditions. These loans can quickly put less-careful borrowers underwater - the interest rate on payday loans can get as high as 400% and title loans may require forfeiture of your vehicle.

Photo by Etienne Martin

How Long Does it Take to Build Credit?

Building credit is a lifelong journey, but with the proper care and choices, an immigrant starting with no credit can develop a solid score within a year. 

Some people believe that you lose your credit history when making the switch from an Individual Taxpayer Identification Number (ITIN) to a Social Security Number (SSN) and need to start over. However, it is entirely possible to transfer your credit history from your old ITIN to your new SSN. To do so, you must write a letter to each credit reporting agency: Equifax, Experian, and Trans Union Corp. In each letter, be sure to include copies of your ITIN, Social Security card, Employment Authorization Card, driver’s license (if applicable), and a utility bill or bank statement containing your name and current address. Once each agency accepts your request, you can continue building your credit under your SSN.

Getting your start in the United States credit system may seem daunting, especially alongside the inherent complications of moving to a new country. But, by choosing the right credit card, starting with small purchases, and avoiding pitfalls such as fee-based cards and loans, you can be well on your way to good credit in no time.