Immigrants Can Ease Transition With Less Debt & Higher FICO Scores

A Social Security Number Is Important

To build or improve your credit, you’ll often need a social security number. Social security numbers are essentially 9 digit numbers that are assigned to residents of the United States. It’s important when talking about credit, because this number is generally used to track your reliability in financial situations.

Anytime a company is trusting in your financial dependability, whether it’s renting an apartment or buying a car, a good credit score can be a determining factor in whether or not they decide to do business with you.

Getting a social security number as an immigrant can be a complicated process, and in some cases very difficult. Generally, you can apply for a social security card if you’re approved for an immigrant visa. This, in turn, will give you the qualifications you need to start building credit. If you’re unable to secure a social security number, consider looking into other options, such as obtaining an individual taxpayer identification number from the IRS. This will also serve to help you get the credit you need.

Consider Working with a Credit Repair Agency

There are a number of organizations that offer free advice on credit repair to new immigrants. Reputable credit repair companies such as Pyramid Credit are staffed with experts in financial matters – especially related to credit – specializing in clients with either no credit history or poor credit.

Getting the initial opportunity to build credit, or recovering from financial mistakes in your past, can oftentimes be a difficult task. Taking advantage of these credit repair agencies for no additional charge is a great way to get advice and guidance on building credit without adding additional debt.

Keep Your Expectations Realistic

As a person with no credit, and especially as someone new to the country, there’s a limited amount you’re going to be able to do to start – even with the help of a quality credit repair agency. Expect to spend months or even years slowly building up a credit history before you’re able to make any large purchases. It’s a slow and steady process, but with commitment and financial responsibility, you’ll start to see your efforts pay off.

Realistically, however, you’re going to need a quick way to gain some basic credit if you want to find a good place to live. Some places will let you prepay ahead for several months of rent. If that’s not an option or you just don’t have the funds, you’ll need good enough credit to make your landlord or bank confident in your ability to pay.

The sections below deal with how to establish or repair credit as an immigrant, and assumes you’ll be starting from the very beginning with no ability to secure loans or credit cards.

Look for a Secured Card

Many banks will now issue a secured credit card to individuals with poor or nonexistent credit. These cards function differently from a regular credit card and have reduced risk associated with use for the loaning bank. Basically, every time a bank gives out a credit card or loan, they’re taking on a risk that the money won’t be paid back. Managing that risk is important for these companies to stay in business, so they often avoid dealing with customers who have low or new credit.

A secured credit card offers a card with a low spending limit. The “secured” part means that users have to transfer enough cash to cover their spending limit before they’re authorized to use the card. Basically, this means that the credit you’re using is already covered by the money you’ve paid to the bank. Essentially, there’s zero risk for the lender, even if you miss payments. Spending a small amount of money on a secured credit card each month and paying it off in full is a great way to slowly start building your credit.

Being approved for the first credit card is difficult. However, once you’ve jumped through that hoop and have started building your credit by spending responsibly, you’ll find the rest of the process will be a lot easier.

Secure Your First Real Credit Card or Loan

When you’ve built up some good credit from regular use of the secured card, it’s time to apply for another credit card or a loan. There’s only so much that a secured card can do for your credit, and you’ll need more lines of credit in order to continuously increase your score.

Apply for a credit card or loan that you feel you may have a good chance of being approved for. Do some research online on good beginning credit cards or banks that offer loans for customers with average credit and make the decision to add another line of credit to your history. Continue making payments on both your secured card and the new credit line. Then enjoy the increased flexibility and options that a good credit score will give you.

Keep on Moving Forward

These steps encompass only the first parts to a process that will span your entire life while you’re living in the United States. As long as you’re relying on credit for some portion of your lifestyle, you’ll need to maintain the good credit score you’ve worked so hard to establish. Continually make wise decisions, spend responsibly, and keep in contact with the expert staff at the credit repair company to make sure you’re still on the right track.

Immigration and establishing a life in your new home is a difficult process, however, following these guidelines will allow you to be one step closer to financial security with access to the resources you will need to prosper.

Improve Your Credit Scores – The Easy Way

The credit score of an individual plays an important role in determining his/her eligibility for a certain type of loan. People While a good credit score makes one easily eligible to seek finances, a negative credit score does just the opposite. Though a majority of lenders are apprehensive of extending loans to people with bad credit scores, this should not dampen the spirits of an individual from seeking loans to meet his/ her necessities. Bankruptcy or a poor credit score is definitely not the end of the road. There are companies that specialize in providing bad credit loans to the customers. Apart from that, with proper knowledge and application over a period of time, an individual can improve his credit score and become a preferred customer for the financing companies yet again.

Firstly, it helps to find out the cause of a low credit score. Figure out if your demands are more than what you can afford, whether you are an extravagant spender, or do you save enough. Reasoning these out will certainly help in finding a way by which you can curb your expenses and have a control on your finances.

Have a good look at your credit report. A credit report is a cumulative report based on the payment history, length of credit history, amounts owed, type of credit and any new credit opted for. Check if there are any errors related to the record of transactions carried out by you. In case of such errors, correspond with your reporting agency and ask for a detailed investigation to fix the problems.

Try to improve your credit scores by paying the bills on time. Clear up the past due bills, if any. Get in touch with your creditors and work out a payment plan that meets the interest of both the parties. Try to minimize your credit card balances and pay off the debts rather than opening new accounts which can in turn lower your credit score. However if you have zero balance unused accounts, do not close them as it might do some good to your overall credit score.

A low credit score holder finds it difficult to qualify for an unsecured credit card or an auto loan. In such a case, a secured credit card is a wiser option. Secured cards give a credit limit that is equal to the amount you have at the issuing bank. Make sure the secured credit card has a reasonable annual fee and also reports your transactions to the major credit bureaus such as Equifax, Experian and Transunion. Your credit score will only improve if your payment details are reported to these credit bureaus. With regular payments one can get the secured credit card upgraded to an unsecured one in a years time. People intending to buy a car can opt for specialized auto loans such as bad credit car loans. These loans charge a higher rate of interest than the general ones but on-time payment of EMIs for a bad credit car loan certainly helps the credit score. Once the score improves, a customer can refinance it with a general car loan that charges a lower rate of interest.

There is nothing to feel downhearted and devastated when you have a low credit score or have run bankrupt. Rather, this should be taken as an opportunity to re-plan your finances in a better way. A wise and strategic approach towards your finances will definitely help you to overcome this temporary phase by improving and building up a good credit score.

Student Loans and Credit Scores

Discussing family accounts as a way to build credit, it was mentioned that people starting out will usually have student loans as their first credit account, unless they obtain a car loan or credit cards tied to a family member with credit history. Student loans are a tricky area of installment credit history because they are not looked on as favorably as you would imagine.

You might think that having opened student loan accounts when you first went to college would show a history of the account, but in actuality, only when you start making your first payment will student loans count as “credit payment history.” Most student loans are in a deferred status as long as you are in school. Once you are out of school, you have one to four months before the companies begin asking you to make monthly payments that pay down the principal and interest.

Yet, when you have student loans, you have an “amount owed.” This amount owed can actually be reducing your credit scores. One the one hand, you feel that making payments should increase your scores, but then you get dinged for having a high amount owed.

So what can you reasonably do about student loan debt? Do you want to pay it off right away?

According to people like Stephen Snyder and Robert Kiyosaki, if you have student loan debt, you want to leave it as the last items you pay off. It comes down to an IRS strategy. The history of this strategy has existed since student loans became necessary for people to go to college. The minute the IRS allowed you to use your student loan interest paid as a deduction is when this strategy came into being.

How it Works

  • Each month you make a payment you pay interest and a little towards your principal, when you are newly paying on the account.
  • When you file taxes, you are asked to enter the amount in student loan interest you paid.
  • The amount paid is a deduction.
  • During this same period, you are paying a little of the “amount owed,” thus reducing your overall debt amount.
  • You are also making payments, and as long as they are on time and the full monthly amount, you are helping your scores.
  • When you get to a point in the loan, where you are barely making any interest payment at all towards the balance, pay off the debt.

Summary

Student loans, when you first start taking them out appear on your credit report, but without any payment history. It is just an open installment account. The lack of payment history does not help your score, nor does it hurt it. The debt utilization ratio on the other hand will hurt your score a little. It is due to having this debt that makes your score a little lower than if you had no debt at all.

If this is the only debt you have, then it is also considered “little to no debt,” which also does not help when you are trying to get new loans to build your credit history.

When it comes time to make payments to the student loan companies as part of your installment agreement, you need to be on time and pay the monthly amount asked for. If possible, pay more than the monthly amount.

Paying interest helps lower your taxes owed. You want this deduction and the payment history. The deduction may be the only thing you have helping you get a tax refund. The payment history is also helping you increase your score, as the balance goes down.

There will come a point when you are going to pay off the debt in full. Do this when the deduction on your taxes is no longer significant. The reduction of debt owed will also help at this point. The reason behind this key point lies in the other credit you have built. You should be in your 30s or 40s, with a mortgage, credit cards, and other credit that weighs more significantly on your ability to get credit. You no longer need the payment history from the student loans. In fact, given the amount of debt you might have at this point, you want to reduce the “amount owed” you have overall.