Question: I'm moving to the U.S. from Germany in a few weeks. Will my credit history transfer to the U.S.? If not, how do I build a good history?
Answer: First of all, welcome to the U.S.! Unfortunately, your history will not transfer to the U.S., so you'll have to build credit from scratch. But don't be too discouraged by that. There are simple steps you can take that will put you on the road to a good history in the U.S.
Apply for a social security number (SSN). Now, this isn't technically required in all cases. It's possible to apply for some cards without providing a SSN. But here's the thing: You can build a history without it, but you'll have more opportunities to get credit if you have an SSN. But to make it even more confusing, you can't get a SSN for the sole purpose of obtaining credit.
Now, if you plan to live in the U.S. and you're not independently wealthy, you'll need a job and that will require a SSN. So that's a valid reason to apply for one. A bonus for getting a SSN is that it helps identify your credit file and that's important. To get more details about how to apply for a SSN, check out the immigration page of the U.S. government's social security website. Another great resource on the same site is this PDF: Social Security Numbers for Noncitizens.
Pay all of your bills on time. Your payment history makes up 35 percent of your FICO score. Paying all of your bills on time is the foundation for great credit. And be sure you pay all of your bills on time, not just your credit card bill. It's possible that a very late phone bill could get reported to the credit bureaus. Do whatever it takes to remind yourself when bills are due. For some, setting up automatic payments does the job.
Get a secured card. It's very difficult to get a decent unsecured card when you're new to the U.S. and have zero history here. A secured card is a good option to help you get started. With a secured card, you have to make a deposit in a bank to "secure" the card. The deposit amount varies by issuer, but it is usually at least $200. Your limit, in most cases, matches your deposit amount.
The deposit stays in the bank account, so when you use your card, you're actually buying things on credit. Use the card every month, but keep your balance below 30 percent of your limit and pay your bill in full by the due date. As long as the bank reports your payment history to the bureaus, you'll begin building a credit history. Note: Most secured cards report to all three bureaus, but be sure you confirm this before applying for a card. If it isn't clear on the issuer's website, then call and ask about the company's reporting policy.
Give it six months to generate a FICO score. The score used most often by lenders is a FICO score and it ranges from 300 to 850. A score of at least 700 puts you in the "good credit" range. But it takes around six months of using credit to generate a score. It takes time and responsible use of your card to establish a good score.
After six months, check your reports and review the details for accuracy. You can get the reports free at AnnualCreditReport.com. You're entitled to a free report once every 12 months from each of the three major credit bureaus: Equifax, TransUnion, and Experian. You can buy your FICO score from one of the bureaus and it costs around $20. You certainly don't need to buy a score every month, but it's a good idea to get a baseline score while you're working on your credit.
Throughout the year, you can check on your credit health by using LendingTree's free credit score. LendingTree provides a AdvantageScore 3.0 credit score, a credit model created by all three major reporting bureaus. It's similar to FICO and you can use it to gauge your progress. You'll also get details about what you're doing well and what you need to improve upon.