Building Credit as an International Student in the USA: Smart Steps to Start Strong

The earlier you start building your credit in the USA, the better it is. In a country where most people rely on credit cards for almost everything, it is essential that international students be well-versed in strengthening their financial profile.

If you build your credit in the USA, it will save a significant amount for you while studying and after completing your education.

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Explained: Building Credit as an International Student in the USA

The prospect of building credit sounds intimidating, especially when one is first getting started on their credit-building endeavors in the United States. Credit Building in the USA refers to creating a history of your financial track records as far as money management is concerned. The activities carried out by you to build credit are:

• Using a credit card to pay bills
• Taking small loans and their repayment
• Having zero high debts

Such actions help in gaining a credit score, which is a numerical index that reflects the level of your creditworthiness.

In the USA, several credit scores fluctuate according to a client’s expense patterns, repayment history, and overall financial behavior.

FICO score is a popular scoring model in the USA, developed by the Fair Isaac Corporation. While there are alternative models like VantageScore, FICO remains the standard used by most lenders.FICO scores range from 300 to 850, with higher scores indicating better creditworthiness.

• A FICO score assists in predicting how likely you are to repay borrowed money on time.
• A credit history of at least six months is required to obtain a FICO score.

Different lenders may obtain your credit information from different reporting agencies and may use varying scoring systems based on their preferences or system compatibility.

Elements of your credit history

Elements of your credit history reports help to determine your overall credit score. Those elements include:

• Payment history (35%): Shows your timely repayments, loan debt, and other debts.
• Amount owed (30%): Displays the total debt in relation to the available credit. This factor should not go high.
• Credit history length (15%): A more extended credit history iss preferred by lenders as it shows you have experience managing debt. Building your credit history as early as possible is suggested for this reason.
• Types of credit (10%): There are different types of credit, like student loan USA, retail, and credit cards. If you can manage well, it will reflect your financial responsibility.
• New credit (10%): This factor assesses multiple credit lines is a shorter duration. Accumulating too many credits within a short span of time is risky.

Why Is Building Credit Important for International Students in the USA?

Building credit in the USA as an international student shows that you are a reliable borrower. It may not seem important at the time of your arrival, but you will understand its importance in the long run.

Consider that you need an urgent loan to cover an unexpected expense, such as purchasing an apartment. In that case, when you apply for a private loan, your credit scores matter.

Credit cards save a significant amount in the USA if you have better money management skills. You can enjoy the benefits of having a better credit score from 6 months to 1 year after purchasing a credit card.

With good credit scores, international students in the USA can:

• Qualify for better credit cards and student loan USA terms
• Rent an apartment without a cosigner
• Fund their educational needs
• Finance a car
• Lay a solid foundation for future immigration or job opportunities

Can International Students Build Credit Without an SSN?

SSN or Social Security Number is a 9-digit number issued by the U.S. Social Security Administration (SSA) to track income and benefits related to tax and Social Security.

Best Credit Cards for International Students

Many fintechs offer credit cards without an SSN to international students. Examples of such fintech credit cards are

• Zolve
• The Platinum Card from American Express
• Capital One Quicksilver Secured Cash Rewards Credit Card
• Wells Fargo Active Cash Card
• Blue Cash Preferred Card from American Express.
• Deserve EDU Mastercard
• Discover it Student Chrome

How to Start Building Credit in the USA as a New International Student?

Open a US bank account and apply for a student-friendly credit card to make your purchases. According to the bank’s rules, you can be an authorized credit card user if you have parents or a guardian in the USA.

• Get a credit card or become an authorized user
• Pay your bills on time
• Track your monthly expenses and manage well
• Limit credit applications to control your expenses

Credit cards

Credit card usage is typical in the USA. Apply for one and use it for daily needs. Pay the bill once every week or month, as the interest rate for late payment can be high. It’s better to create an automatic payment to avoid accruing loan debt.

Check for fintechs that offer credit cards to international students in the USA without an SSN.

How Long Does It Take to Build a Good Credit Score as an International Student?

Typically, it takes six months to a year to establish a basic credit score if you use credit responsibly. However, reaching a “good” score (above 700) may take longer depending on your spending, repayment habits, and credit utilization rate.

Talk to Nomad Credit’s US Study Counsellor

The Role of ITIN in Establishing Credit for International Students

For international students without an SSN, an ITIN (Individual Taxpayer Identification Number) can be helpful for many reasons. An SSN is commonly used for credit applications and reporting, an ITIN is issued by the IRS to individuals who need to file US taxes but don’t qualify for an SSN.

How ITIN support credit building?

• Bank accounts: Many U.S. banks and credit unions accept ITINs to open checking or savings accounts.
• Credit cards: Several financial institutions allow students with ITINs to apply for secured or student credit cards.
• Credit history: Responsible credit card use helps students start building a credit history tied to their ITIN.
• Financial products: In some cases, ITINs can be used to apply for student loans USA, though eligibility may vary by lender.

How to build Credit using an ITIN in the USA?

• Apply for an ITIN
• Open a bank account. Choose banks that accept an ITIN
• Apply for a credit card
• Practice healthy credit habits

Common Mistakes to Avoid

While you make transactions to build your credit history in the USA as an international student, make sure your financial habits are controlled. Remember the following tips:

• Don’t use maximum credits. It is better to keep your spending under 30% of your limit.
• Never make late payments. One late payment can significantly impact your credit score.
• Don’t apply for many credit cards. Limit your credit cards to 1 or 2.
• Always monitor your credit score and financial habits. Failing to track your credit score and spending can quickly lead to increased debt.

Conclusion

As an international student in the USA, building your credit is crucial for effective financial management. You can start enjoying the benefits of credit cards and building your financial profile from 6 months to 1 year after obtaining a credit card. Consider fintechs that offer a credit card without an SSN.

There are many benefits of building your credit scores in the USA while you study, and after. However, be sure to maintain healthy financial habits and regularly track your credit scores. Never make late payments, as it will negatively impact your credit score.

If you plan to study in the USA, we offer personalized guidance on budgeting. Get detailed funding guidance to study in the USA from Nomad Credit’s dedicated counsellors. Access tailored support with your US admission, scholarships, education loan options, SOP, and student visa for free. Elevate your study abroad game – connect with us today!

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