You’ll learn a lot by studying at an U.S. university, but there’s one lesson that usually isn’t part of the curriculum: how to build credit. It’s something that even U.S. students don’t pay much attention to, which is unfortunate, as building credit can make an enormous impact on your post-college life in the U.S.
That’s because your credit score goes a long way in determining your trustworthiness as a borrower. If you don’t have a credit history or if you have bad credit, banks will likely turn you down when you ask for a loan. That means buying a house or a car, or getting the money to launch a business, will be more difficult.
In addition, some landlords run credit checks on potential renters to determine whether or not they’ll rent their apartment to the person. Perhaps most worrying of all is that some employers do the same checks on candidates they’re thinking of hiring.
As scary as that all is, you shouldn’t be alarmed. International students need to jump through some additional hoops to build credit to satisfactory levels. However, it isn’t impossible to establish good credit. Just follow these steps.
1. Get a Social Security number: U.S. students typically get Social Security numbers as soon as they are born and their parents show their birth certificate to the appropriate authorities. It’s a little more difficult for international students, but no less important.
A Social Security number provides proof of your identity to the government, banks, credit card companies and employers. It essentially stores your financial history, and you need to apply for one.
Full-time foreign students are permitted to apply for a number by applying to the nearest Social Security administration office, and locations can be found online. It’s a multistep process involving lots of paperwork. To help make things easy, check this guide to applying provided by the University of Washington.
2. Get a secured credit card: Americans commonly use credit credits for just about any transaction they can, but international students can have difficulty obtaining a card due to untested financial history. That’s where secured credit cards come in.
A secured credit card works the same as any other card where you charge your purchases. The difference is how it’s paid off.
With normal credit cards, you’re “lent” the money for purchases and expected to pay it back at the end of the month. With secured credit cards, your credit limit is equal to the amount of money you put on the card to secure it, but you must still pay the bill at the end of the month. It’s almost like a gift card that can be used anywhere, but with plenty of protections against theft and loss. If you lose the card, you won’t lose your money.
It’s convenient and safer to carry this around rather than using cash. Most importantly, it slowly builds up your credit to the point where you can obtain a normal credit card. In the meantime, if you’ve proven reliable with your secured credit card, the company might provide you with some credit that doesn’t require a deposit on your part.
3. Don’t be afraid of using credit cards: You might be leery of using a credit card, and there can be some good reasons for that. Americans have an alarmingly high rate of indebtedness, with the average household owing more than $7,000 on their cards.
Still, credit cards are necessary to establish a financial history quickly. Establishing reliability in paying off student loans will also determine your credit score. However, not paying off your bills on time has much more of an impact on your score than paying off your bills regularly. That’s why it’s important to not miss a payment.