Relocation Story: Building Credit in the United States
Do you have questions about building credit in the United States? Our family relocated from Northampton, England, to California in 1999, and we know, firsthand, how difficult it can be to transition to life in the United States, especially considering the credit system is totally different from the one in the UK.
No matter what stage of the process you are at – whether you have just begun navigating the Immigration Maze or thinking about moving to the United States or have already received a US Visa and moved to your new home – this article can help you understand how to build credit in the United States so that you can secure financing for your family and personal business as quickly as possible.
The Need for Credit in the United States
For better or for worse, the economy of the United States is built on credit. Financial institutions will offer financing, credit cards and loans to individuals based on their creditworthiness, which is determined by credit history. If an individual has no credit history, then financial institutions will (for the most part) refuse to extend credit to them.
Most Americans never have to deal with this dilemma because they are able to start building credit from a young through student loans, student credit cards and student financing on certain items. Even those who are not pursuing higher education benefit from having their social security number tied to many different transactions involving their parents, which helps build a credit history. But immigrants from other countries are faced with a huge problem – they have no credit history in the United States whatsoever.
This issue of having no US Credit History is exacerbated by financial institutions’ inability and unwillingness to consider any credit history from the immigrant’s life outside the United States. So, no matter how strong an immigrant’s creditworthiness was in their home country, lenders in the United States will still be unwilling to do business with them until they have a credit history in the United States.
Therefore, your goal upon entering the United States should be to obtain a social security number as quickly as possible and then find a way to establish credit history.
The Social Security Number
In the 1930s, a landmark event in American History occurred called the “New Deal,” a series of social reform measures taken under then President Franklin D. Roosevelt (FDR) to pull the United States out of the “Great Depression.” Part of the “New Deal” was a Social Security Act which assigned everyone in the United States a number to track their social security accounts and grant them unemployment benefits when they could no longer work. This “Social Security Number” was unique to every individual, and soon both the government and private sector were using it as a personal identification number.
In 1970, legislation was passed requiring the Social Security Number to be used by almost all financial institutions, and this is when it began to be tied to credit in the United States. Consumer Credit Reporting Agencies were started by private entities to gather information from financial institutions, tie it to individuals’ Social Security Numbers and score their creditworthiness with a FICO score. Now, financial institutions will not lend to anyone without a credit history and require debtors to permit them to report credit activity to Consumer Credit Reporting Agencies.
The UK Credit System
As you are aware, the UK does not have an equivalent to the US Social Security System. Instead, the UK assess your credit through four main factors, rather than through a specific, personalized number that follows you for life. These four areas include:
(1) addresses and linked data,
(2) electoral roll information,
(3) court records, and
(4) account data.
Where you live is of upmost importance in the UK for your credit score. Your UK credit report will consider up to 7 years of previous residences. Taking into account how often you move, and any debts associated with those residences. In addition, UK has a unique Electoral Roll requirement (voter registration). As such, Credit companies will utilize the information available on the electoral roll to confirm your current address. If there is a discrepancy, one may experience great difficulty in having a favorable credit score or obtaining a loan.
Credit companies also conduct public record searches against the applicant’s known addresses to look for County Court Judgments (CCJs), bankruptcies, or other debt-related court orders. Lastly, every credit card, loan/mortgage, bank account, and mobile phone contract you entered into for the last six years will also be analyzed.
Due to the stark differences in assessing your credit score in the UK versus the US, neither country will recognize credit scores from the other.
Obtaining a Social Security Number in the United States
Therefore, it is essential for immigrants to obtain a Social Security number as soon as possible so that Consumer Credit Reporting Agencies can begin tracking your financial information and report on your creditworthiness to lending companies. In order to acquire a Social Security Number, immigrants must visit a Social Security office in the United States with your immigration papers, and the Social Security office will determine if you are indeed eligible to receive a Social Security card. Often, you will only be granted a Social Security card if your visa allows you to work. Thus, if your visa allows you to work, but not your spouse or children, then they will not be eligible to receive a Social Security card. Please note that without a Social Security card it’s almost impossible to borrow money.
How to Begin Building a Credit History in the United States
After you have obtained your Social Security number, here are some options for you to consider:
1: Use the capital you already have to secure a loan or credit card for yourself. This works by going to a financial institution and laying out a security deposit that would cover the entire amount that you are going to borrow. As you use and make payments on the money you borrow, all these transactions will be reported on your credit history and help you establish a credit history.
2: Ask your current (foreign) credit card company to issue you a credit card in the United States. This works if you have a credit card company which also issues credit cards in the United States. Today, many banks are multinational and if they have a branch both in your home country and the US they may be able to help you establish credit in the US.
3: Find a US Co-Signer. If you have a friend or family-member with established credit in the United States, you can ask them to co-sign an application for credit. Financial institutions will consider the credit of co-signers when deciding whether or not to issue you credit, and then all credit activity will be reported on your credit history.
4: Use what you have to work with private lenders. Take documents like your employment letter, salary slips, bank statements and foreign credit statements to acquire a loan (like a car loan) from a local lender. Some retailers finance purchases themselves and might be more flexible than large financial institutions. The payments you make on small loans should also be reported on your credit history.
Once you have a credit history, which typically takes about six months to a year to build, financial institutions in the United States will be more willing to extend credit to you.
Getting Set up in the US
Without established credit in the US getting set up can be quite expensive. For example, getting a place to lease without established credit may require you to put down a larger deposit than normal plus offer to pay 3-6 months rent up front. Also, the same could be true when it comes to setting up your utilities as a security deposit of advance payments may be required. Leasing or financing a car will also be challenging, depending on the type of visa you have. So if you’re unable to establish credit until you actually get your visas, set aside extra funds to cover these set-up costs so you’re not caught unawares.
We hope you found this article helpful and, of course, if you have any questions please do not hesitate to get in touch so we can discuss your entire relocation plan.
US Immigration Law Offices of Chris M. Ingram
Chris M. Ingram LL.M., ESQ – Immigration Attorney
Admitted in New York.
Practice Specializing in US Immigration Law
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Tel: 310 496 4292
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Specializing in the E2 Visa, EB1 Green Card, L-1A Visa and O1 Visa and K1 Visa Marriage-Based Immigration. Attorney Chris M. Ingram is dedicated to providing the very best in US Immigration legal representation. Enjoy our website.
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