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Getting handle of your Credit Score as an Immigrant

In US, credit score can either be a boon or a bane. Having a good credit score opens up access to cheaper mortgage rates, better credit cards and comfortable auto loans. Absence of one can cause the opposite.

As an immigrant, one has no prior credit history. Lack of credit history is not seen favorably by several financial institutions and one is left with the task of building it slowly over the years. In this article, I will highlight my journey with the same.

No Credit History
At this point not many banks are willing to offer you a credit card. Still you have following options:
1. Go for a secured credit card. For example, if you have checking account with Bank of America, you can open a secured credit card with them. They would extend a credit limit based upon set minimum balance in your checking account (which is kept as collateral in case of default).
2. Go for a credit card like Capital One which doesn’t have any annual fees but still offered to people with bad or low credit scores. They don’t have a huge credit limit, but it is reevaluated every 6 months and over period of time you can get a comfortable credit limit. This is what I did.

Good Credit History
At this point more banks are willing to offer you a credit card. Shop around for a credit card that offers a cash back and has no annual fees. If you are like me (someone who pays off the entire balance every month), then high APR shouldn’t be a deterrent from getting a good credit card. Live within your limits and see you credit history building. When my score reached early 700s, I opened up American Express Clear card (1% cash back).

Excellent Credit History
Once you have build your credit score into mid to high 700s, you can shop around for some great credit cards. Here are my personal favorites:
1. Blue Cash Preferred from American Express: Although there is an annual fees of $75.00, it offers 6% cash back on all grocery store purchases up to $6000. There is a sign-up bonus of $150 (after spending $1000 in 3 months) which in a way knocks off 2 years of annual fee. In addition, you can buy gift cards from a grocery store like Safeway, which would indirectly give you 6% cash back on many other retailers.
2. Citi Double Cash Card: This card has no annual fees and offers 2% cash back on all purchases with no exclusions (actually you get 1% cash back on making the purchase and another 1% cash back on making the payment agains the outstanding balance).
3. Discover IT Card: It has no annual fees and offers 1% cash back. In addition, it has rotating categories for 5% cash back, which allows you to avail greater cash back every quarter. The accumulated cash back can be used to buy discounted gift cards (1-20% discount).
4. Chase Freedom Credit Card: It is very similar to Discover IT card, except they don’t have any discounted gift cards as redemption option.
5. Store Card: Over the years, you would develop affinity towards certain stores (I have towards Amazon and Gap) and would do bulk of purchasing at those stores. Do research to see if getting a store card at those retailers can benefit you.

Few Other Things to Keep In Mind:
1. If you have dependents, you can open add-on cards for them even if they don’t have SSN.
2. You should always make use of the free credit reports from the 3 reporting agencies. You are entitled to 1 report from each agency every 12 months.
3. You should keep a track of your credit score (free credit reports do not contain your score). My personal favorite is Credit Karma. It’s free and keeps you on top of your game.
4. Use sites like fatwallet, ebates etc to earn additional cash back than what’s offered in your credit card. If you want to sign-up for ebates and don’t mind using my referral link, then use this (thanks in advance).

Hopefully within few years these credit cards will help you in having a good credit score and getting better deals on those big purchase items like car and house.

Questions, comments, criticism – use the form below.

Image Credits: http://i.telegraph.co.uk/multimedia/archive/02007/credit-cards_2007247b.jpg


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