How to Build Credit in the US as a Newcomer: 12-Month Plan

You might have had a great credit record back home, but in the US you'll probably start with no credit file at all. That matters, because landlords, lenders and insurers can all look at your credit. The good news is that no score is not the same as a bad score, and you can build credit in the US with a few simple habits.

This guide explains how the system works, which products help newcomers get started, and a month-by-month plan for your first year.

How US credit reports and scores work

Your credit reports are records of your borrowing and repayment history. They're kept by the three nationwide credit bureaus: Equifax, Experian and TransUnion. Lenders, card issuers and some other companies send them information about your accounts.

A credit score is a number calculated from the information in those reports. The CFPB describes it as a prediction of your credit behavior, such as how likely you are to repay a loan on time. Most scores range from 300 to 850, and higher is better.

You don't have just one score. Different scoring models, data sources and even calculation dates can produce different numbers. According to the CFPB, the factors that matter include:

• Your payment history
• How much debt you have and how much of your available credit you use
• The number and types of accounts you have
• How long you've had credit
• New applications for credit
• Collections, foreclosures or bankruptcies

Scores affect more than loans. The CFPB notes they can be used in tenant screening and insurance decisions, and they can affect the interest rate and credit limit you're offered.

Why your home-country credit usually doesn't count

US bureaus build files from US account data, so your history abroad generally stays abroad. That's why many newcomers are "credit invisible" at first.

Some lenders work with cross-border credit services that pull a report from certain countries and translate it into something a US lender can assess. These services cover a limited number of countries and lenders, so if you have strong credit at home, ask a card issuer or bank whether it accepts international credit history. Don't count on it, though.

SSN vs ITIN: which number do you need?

Most lenders ask for a Social Security number (SSN) when you apply for credit. If you're authorized to work in the US, you'll generally use your SSN. Check the Social Security Administration's website for how to apply.

If you aren't eligible for an SSN but have a federal tax reason for a number, the IRS can issue an Individual Taxpayer Identification Number (ITIN). The IRS says an ITIN doesn't authorize you to work, give you immigration status, or qualify you for Social Security benefits.

The best ways to build credit in the US from scratch

You don't need many accounts. One or two, managed well, is enough to start.

Secured credit card. You put down a cash deposit, and your credit limit is usually based on that deposit. The CFPB's example is a $500 deposit that lets you spend up to $500. Most secured cards report to all three bureaus, so check that yours does before you sign up. Compare the annual fee and interest rate, and ask whether the issuer will review you for an unsecured card later.

Credit-builder loan. These are often offered by credit unions and nonprofit lenders. You don't get the money upfront. Instead, it's held in a savings account while you make payments, and you receive it when the loan is repaid. CFPB materials describe terms of roughly 12 to 24 months, with payments reported to at least one bureau. Ask which bureaus the lender reports to.

Authorized-user status. If a trusted family member or partner adds you to their card, the account can appear on your credit report. You aren't legally responsible for the bill, but their late payments could still hurt you. The CFPB suggests treating this as a first step and moving on to your own credit product.

Rent reporting. The CFPB says positive rental payments can help build credit when they're reported. Ask your landlord whether they take part in a rental reporting program, and check for any fees. Utility payments, by contrast, are usually not reported to the nationwide bureaus.

If you're still sorting out your long-term status, our guide to US green card paths explains the main routes. Your credit file stays with you whatever your visa, as long as your identifying details stay consistent.

Your 12-month plan to build credit

Here's a realistic plan. Timelines vary, and no plan can guarantee a particular score.

Here's a hypothetical example. Amara moves to Texas for a new job. In her first month, she opens a checking account and a secured card with a small deposit. She uses the card only for her phone bill and pays it off automatically. At month four, her free report shows the card with on-time payments. By the end of the year, she has a short but clean history, and she asks her issuer whether she can move to an unsecured card.

How to get free weekly credit reports and dispute errors

According to the FTC, all three bureaus have permanently extended a program that lets you check your report from each one free once a week. The only authorized site for these reports is AnnualCreditReport.com, or you can call 1-877-322-8228. Checking your own report doesn't hurt your score.

Watch out for copycat sites with similar names. The FTC says AnnualCreditReport.com and the bureaus won't email you asking for your Social Security number or account details.

If you spot a mistake, follow these steps:

1. Write down each error and gather documents that support your case.
2. Contact the credit bureau that shows the error and ask it to correct or remove the information.
3. Contact the business that reported the information, too.
4. Send letters by certified mail with a return receipt, and include a copy of your report with the errors marked.
5. Wait for the results. The FTC says the bureau has 30 days to investigate, and it must send you the results in writing.
6. If the information is corrected, you can ask the bureau to notify anyone who got your report in the past six months.

Common mistakes newcomers make with credit

• Applying for several cards at once. Each application can add a hard inquiry, and rejections don't help.
• Using most of your limit. How much of your credit you use is a scoring factor, even if you pay in full.
• Missing one payment. Payment history is a major factor, so autopay is your safety net.
• Closing your first card too soon. The length of your credit history counts.
• Assuming utility bills build credit. They usually aren't reported to the nationwide bureaus.
• Paying for reports. Weekly reports are free at the official site.
• Ignoring insurance. Credit can affect some insurance decisions, so shop around for car and renters insurance rather than taking the first quote. Health cover works differently, so read our guide to health insurance for new immigrants in the US.

Next steps to build your US credit

Pick one starter product this week, whether that's a secured card, a credit-builder loan or authorized-user status. Confirm that it reports to the bureaus and that the lender accepts your SSN or ITIN.

Set up autopay, then add a calendar reminder to pull your free reports in three months. If you're also supporting family abroad, our guide to comparing international money transfer costs can help you keep more money in your budget for paying bills on time.