Building an excellent US credit score for immigrants in under one year
By: Charles Copley
Tags: Banks, Immigrants, Credit, Credit Score, Immigration

Building an excellent US credit score for immigrants in under one year

A guide to the credit system for the newly landed…

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My fiancé and I moved to the US in November 2018. I came on a K1 Fiancé visa (a story for another day!) and when I arrived I had NO credit history in the US AT ALL! As anyone will tell you this is a real pain! It effects EVERYTHING! From getting a job to apartment rentals to buying a car. I set about fixing this and tried to increase my credit score to excellent as quickly as I could. By the end of 2019 my score was >750. This is my story…

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I had been trying to prepare for the move for ages. I tried all sorts of things to establish a credit record before I arrived. I tried American Express (apparently you can move your AmEx credit score from country to country but this didn’t apply from South Africa :( ). I then found that I was eligible for a Creditstacks (this is my referral link!) credit card. This was hugely helpful and got me started from December 2018. I set it up with auto-payments, but still tried to make sure I paid balances before the end of the billing cycle.

I soon found that the one (and honestly only!) problem with Creditstacks was that they only reported my payments to Equifax of the three credit agencies (Experian, Equifax and TransUnion). Apparently this has changed (Creditstacks now report to all three agencies), but what it meant at that time was that I couldn’t sign up for any of the free credit tracking services (for example Credit Karma or Credit Sesame) since those services seem to only use TransUnion reporting for the signup validation process! This was frustrating at the time, but I’m glad it happened since it forced me to stop and think a little more about my overall credit score strategy.

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In March/April 2019, I decided to do four things (after I had gotten my social security number!):

Open two secure credit cards. The first was a Discover It Secured card and the second was an Open Sky Credit Card. Both of these were excellent, but the Discover It Secured card is my preference looking back. It gives up to 5% cash back, and provides a free credit tool online, and converts to a full-fledged credit card in about 6 months provided you don’t miss any payments. There is also a matching cash-back for the first year… Open a Kohls account and bought useful glass tupperwares! Open an Amazon Store Card- this has the bonus of giving 5% back on purchases on Amazon. Note, this is not the Amazon credit card. Get a self-lender loan to the value of $525. This was also great, since it diversified the kind of credit products I had, since the rest are classed as credit cards.

I was pretty much able to open all of the above by March/April 2019 (when I realised I needed to expand my credit products to get a faster increase in my credit score). According to my records my credit score in May 2019 was 622 on TransUnion and by February 2020 was over 750.

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To get there, I optimized based on the how I understood the scoring algorithms- guidance is given below:

Payment history — this accounts for around 35% of the credit score and is determined by your payments on all accounts. Credit utilization — this accounts for around 30% of the credit score. It is calculated as the percentage of credit used at the end of a billing cycle. Credit history length — this accounts for around 15% of the credit score. It is calculated as the average age of all your accounts. Older accounts are useful for this. Credit mix — this accounts for around 10% of the credit score. The types of credit are revolving credit (credit cards), charge cards (store cards), service credit (payment towards a retirement pension), and Installment credit (mortgage, car payments) New credit — this accounts for around 10% of the credit score.

I figured the best way was to make sure I focused on aspects I could control best namely payment history, credit utilization and credit mix. I paid everything as soon as possible. I set up calendar reminders to make sure I prepaid my balances before the billing cycles ended (you can tell the dates based on the statement cycles) and tried to keep my utilization below 5%. I also (as noted above) tried to make sure I had at least some mix of credit by adding the self-lender loan- I think a car loan would also make a difference, or a cellphone account.

There isn’t much you can do to improve Credit History length except to wait. It is worth noting, that closing accounts is not good for credit history length, since it is calculated as an average across all your accounts. Keeping old accounts active is a good idea to optimise this. Opening new accounts also decreases your average age of credit, so it is best not to open new accounts if you want to optimise this part of the credit score. I tried to optimise by opening all my accounts at the same time- my average age of credit now is 9 months and will obviously increase going forward.

With regards to new credit, I didn’t worry too much about this, and did try for a few other credit cards, some of which were denied. This didn’t seem to have a big effect on my score.

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I now find myself having an excellent credit score over 750. This has helped everything from getting mortgage approvals, rental approvals and more! I think my approach was pretty efficient, and would love to help other US immigrants get through this process effectively!

Best of luck!