For many people, especially those who are new to the country, building a credit history can seem like a daunting task. In this article, we are going to discuss how to establish and build your credit history in the United States.
Understand how credit works
Before you start building your credit history, it’s important to understand how credit works. Credit is based on the concept that someone lends you money, and you pay it back within a certain period. When you pay your debts on time, lenders and financial institutions trust that you are responsible with money and are willing to lend you more. If you don’t pay your debts, your credit history will suffer, and it will be more difficult for you to obtain loans in the future.
Get a social security number
In order to obtain credit in the United States, you must first have a social security number (SSN). If you are a recent immigrant, you may not have one yet. You can apply for an SSN at the nearest Social Security Administration office. Once you have your SSN, be sure to keep it in a safe place, as you will need it for any credit application.
Start with a bank account
A bank account is the cornerstone of your financial life. It is essential to establish a credit history in the United States. To open a bank account, you’ll need your social security number, a photo ID, and a physical address. Choose an account that has no monthly fees and offers a debit card. Make sure the account is in good standing and doesn’t have overdrafts.
Apply for a secured credit card
A secured credit card is a great option for those who have bad credit or no credit at all. A secured credit card works similarly to a regular credit card, except that you need to make a security deposit as collateral. Generally, the card’s credit limit is determined by the amount of the security deposit. Be sure to choose a card that reports to credit bureaus.
Use your credit card responsibly
Once you have a secured credit card, use the card responsibly. Make small purchases and be sure to pay off the balance each month. Always pay on time. If you can’t pay the full balance, pay the minimum. Don´t use the card to buy things you can’t afford.
Apply for an unsecured credit card
After having used a secured credit card for a few months and having paid on time, you may be able to apply for an unsecured credit card. These cards do not require a security deposit, but the credit limit will be determined by your credit history. Be sure to do your research and decide a card that has a low-interest rate and benefits that interest you.
Get a small loan
Once you have an unsecured credit card, you may be able to apply for a small loan. Personal loans and auto loans are good options. If you have difficulties to get a loan, you can try applying for a deposit-secured loan. Be sure to do your research and choose a legitimate and trustworthy lender.
Keep your accounts up to date
Once you have multiple types of credit accounts, make sure you pay all bills on time. A single late payment can affect your credit history and lower your credit score. If you have difficulty paying, communicate to contact the lender or credit card company and discuss alternative methods of payment. Building a credit history is an important step for anyone living in the United States. A good credit history is essential for obtaining loans, credit cards, and other forms of financing.
