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IS BUILDING YOUR CREDIT A CATCH-22?

Imagine coming to this country, ready to set up a new life, filled with prosperity and success. But you can’t get a business loan to kickstart your dream, nor a mortgage to provide a house for your family, nor a car loan so you can drive everyone around. Unless you’re one of the fortunate few who can pay cash down for everything, you’re now “credit invisible” – which means you can’t get a credit card or a loan – based upon your empty credit history.

Some 49% of immigrants said a U.S. credit card was hard to obtain, according to a recent OnePoll survey of 300 recent immigrants commissioned by Nova Credit. A further 40% said opening an American bank account was the second-biggest challenge. In fact, obtaining a credit card and bank account were considered priorities even more important than securing a place to live.

Because a new migrant in America cannot access credit often means they resort to other means, such as taking loans from private parties, which can be awfully expensive. On top of that, without an adequate credit score, a new migrant will often spend more on services (for example, someone with a credit score of 550 may get a loan at 40% vs. someone with a credit score of 750 who may get the same loan amount at a much lower interest rate).

Fortunately, there are some basic strategies you can use to break the paradox of “credit – no credit”:

  •         Find out if the bank you used in your previous country operates in the U.S – and if on that basis, they will issue you a credit card.
  •         Apply for credit cards that are specifically geared toward those with little credit history, or get a secured credit card.
  •         Take out a credit-builder loan, which is available at some credit unions and community banks.
  •         Ask to become an authorized user on the account of a spouse or another close relative who already has a credit card in the U.S.

A new migrant often doesn’t understand the complexity of the system, leaving them feeling  confused and directionless. That is why is it crucial for you to learn and apply financial literacy skills. There are hundreds of financial options out there, and you can choose which one is best for you when you know the language of your new financial life. The next two blogs will educate you on this new lingo!