Optimizing your Credit Score as a new EB-5 immigrant

A credit score is an integral part of financial life in the United States. In essence, a credit score is a record of an individual’s ability to pay back financial debts in a timely manner. Various financial entities — e.g., credit card companies, banks, student loan lenders, and mortgagers — report details to credit bureaus, which then issue each individual in the United States a score that is tied to their Social Security Number. The largest credit bureaus in the United States are Equifax, Experian, and TransUnion, each of which allows one to check their scores online. A credit score is also known as a FICO score. Individuals are scored on a range from 350 to 850.

Maintaining a healthy credit score is essential to living in the United States. Financial institutions often will not lend money to borrowers with bad credit scores. For better or worse, one’s credit score is also used to judge an individual’s character and trustworthiness in official matters. Landlords, mobile phone companies, as well as colleges and universities may look at an applicant’s credit score when assessing them. The most consequential effect of one’s credit score is during the purchase of property. A good credit score will affect the interest rate charged on a mortgage, which could save a borrower tens of thousands of dollars over their lifetime.

Given its importance, it is essential to establish a good credit score upon arriving in the United States.

EB-5 Immigrants and Credit Scores

Foreign nationals who immigrate to the United States as adults face a challenge when trying to build a good credit score. In order to do so, they must establish a credit history (i.e., a record of borrowing money and repaying it on time). However, they often need to access credit immediately upon arrival to make essential purposes. This is a dilemma.

The most common way of establishing credit history in the United States is to apply for a basic credit card from a bank where one has an account, which often issues cards with low credit limits (e.g., $2000) on the basis of liquid assets in their checking or savings accounts. Making a few purchases with such a card, and immediately repaying them, will contribute toward a good credit score.

Bringing over credit history from home country

It is generally very difficult to automatically obtain a good credit score on the basis of foreign financial activity.

There are certain services to help individuals transfer their credit history to the United States. These include “Nova Credit” and “Amex Global Transfer” which allow immigrants from specific countries to transfer their credit history when they arrive. Most commonly, one’s home country credit history will be used to obtain a U.S. credit card from that entity, whose activity will then count toward their U.S. creidt history.

Members of the AIIA community have reported using these products in various ways.

Establishing credit from scratch

There are multiple ways to build good credit in the United States. As aforementioned, the most common way to do so is to obtain a credit card through a bank. 

One’s bank balance acts as “insurance” for the bank issuing the card. Most established banks in the United States (e.g., Chase, Wells Fargo, and Bank of America) frequently offer credit cards as products to account-bearing customers. If one cannot obtain a credit card via an account with such banks, they may seek out a credit union to do so. Such institutions (i.e., miniature banks with limited membership) are often more consumer-friendly.

As a last resort, an immigrant can establish credit by opening a “store credit card”. Large retail chains, such as clothing, homegoods, and grocery stores sometimes offer credit cards. These cards usually come with very high interest rates, which is why this option should be a last resort. However, the card still reports your credit history to different credit bureaus, meaning you will still establish credit history by using them. Stores are incentivized to have as many applicants for their credit cards as possible, there should be very few barriers preventing you from accessing this type of card.

Using a credit card

To ensure your credit score is healthy, it is important to pay credit card bills and annual fees as soon as possible and in full. Some credit cards report to various credit bureaus more often than regular credit cards, meaning there are more checks on your payment history and more data points which accumulate in your credit score calculations. The more often you forget a payment or do not pay in full, the more negative data points are created that diminish your credit score. Keep these cards for emergencies only as much as possible. One can also set up “autopay” features for credit cards that automatically debit one’s bank account to pay the balance.

Reporting Tradelines for Credit Score

A “tradeline” is the industry term for any external credit account linked to your bank account, such as rent and utilities. These payments are not typically linked to your credit score, as utility companies and landlords are charged a fee for reporting. However, when late payments are left unpaid, these bodies may report them to incentivize the payee to cough up the necessary funds or face “collection agencies,” which professionally recover debts from delinquent borrowers.

However, one can add these tradelines to their credit scoring to ensure (a) on-time payments are included and (b) the portion of your credit score calculated by payment history will be increased with monthly additions of these payments. Using a third party to do so is the easiest way to go about reporting these tradelines. Organizations such as Experian Boost, ExtraCredit, RentReporter, and SimpleBills allow users to report these types of payments. These agencies levy fees for such reporting, but these fees can pay off in dividends with a high credit score that opens up the opportunity for easier loan approvals and more.