Establishing Credit as an Immigrant
One of the first things immigrants realize when starting their new lives in the United States is the importance of having a good credit score to finance big purchases, rent an apartment, or even find a job. Many foreigners are unaware of the credit system established in this country and its relevance in people’s everyday lives. Oscar Valencia, a financial advisor licensed in the state of Florida, provides practical information about establishing your credit score and what you can do to build your credit history if you’ve just arrived in the United States.
What is credit?
Credit is an amount of money that banks or lenders are willing to give you based on your promise to pay it back. Credit usually includes other terms, like limits to funds you can access and an interest rate derived from the risk that you may become unwilling or unable to repay the loan. Examples include a home mortgage, financing a car, or a personal loan.
A credit score summarizes the financial activities you’ve had in the United States. This score allows lenders and banks to know whether you’ll be a good risk and likely to repay the debt.
Oscar Valencia states, “It’s very important to establish your credit when you first arrive in the United States. As your score gets better, you will have more alternatives when making purchases.”
How is a credit score determined?
There are different factors that come into play when determining your credit score. Valencia explains that the most common ones are:
1. Your payment history
2. Age of your accounts
3. Your total debt
4. The different types of credit you have
A credit score ranges from 300 to 850 points. Valencia states that “having a credit score of 700 is really good. If it’s lower than 600 points, it’s bad and you should work on improving it.”
Where can you find your credit score?
Some credit cards allow you to check your credit score through their website. Valencia says that “if you go to your account statement, you will see a graphic called FICO. That’s where you’ll find your score.”
There are also websites that offer this service, free of charge, and provide a summary of your credit score. If it’s low, they will offer suggestions to improve it.
It’s important to establish and start building your credit as soon as you arrive in the United States. While it may not be easy in the beginning, start with a secured credit card and make your payments on time, every time.
This allows you to gradually improve your credit score, which gives you more opportunities to borrow money at a lower rate in the future. In some states, good credit can even save you money on your auto insurance.
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