Ways to establish credit history for international student

Question

I am a student on a F1 Visa in the US.

Being a non US Citizen and on a student Visa, I am unauthorized to work off campus, and so I am restricted to work upto 20 hours a week on a hourly wage and have no fixed monthly income.

I have a SSN through my on campus job and have been working on-campus for 6 months now, depositing my pay cheques monthly to my account at Chase.

I would like to establish credit history - have heard it's useful to gain employment and makes it easy to rent an apartment?

When trying to apply for credit cards, the forms from the banks assume you are working on a monthly salary or a guaranteed number of hours - hence I have not applied for any cards till now as I am likely to be turned down.

I tried to pull my credit report through CreditKarma but they could not locate my record, asking me to check if I entered everything correctly.

Is it safe to assume that this implies I have no history whatsoever?

I have approached a local credit union that suggested that I take out a cash-secured loan.

Is taking out a secured loan the only way for me?

If so, I have a few questions:

The minimum loan they give out is $250

The rep there recommended that a larger loan amount is more favourable to my history.

1. In that case maybe a $1k would be a good balance?

2. Should I take out $1k as a single loan or four $250 loans? Would this decision matter?

3. What loan term should I select? A year, two years, ..?

4. This CU can give me a rate of 4%, but I was wondering if there are other CUs that have better rates for a rank newbie like myself?

Am I making a right decision by taking out this cash-secured loan?

Would it make much better sense to wait till I get a job (then I would have a fixed monthly salary and can apply for a regular CC directly)

This is going to cost me a lot of money and effort and I wanted to be sure that this route is really worth it.

Answer 1

I would like to establish credit history - have heard it's useful to gain employment and makes it easy to rent an apartment?

Higher credit scores will make it easier with landlords, that's true. As to employment - they do background checks, which means that they usually won't like bad things, but won't care about the good things or no things (they'll know you're a foreigner anyway).

Is it safe to assume that this implies I have no history whatsoever?

Probably, but you can verify pulling through AnnualCreditReport, don't go around giving your personal information everywhere.

Is taking out a secured loan the only way for me?

No, but it's one of the easiest. Better would be getting a secured Credit Card, not loan. For loan you'll have to pay interest, for a credit card (assuming you pay off all your purchases immediately) you will only pay the credit card fees (for secured credit cards they charge ~$20-100 yearly fees, so do shop around, the prices vary a lot!). If you're using it wisely, after a year it will be converted to a regular credit card and the collateral will be returned to you with interest (which is actually very competitive, last I heard it was around 2%, twice as much as the online savings accounts).

As to a secured loan - you'll be paying 4% to CU for your own money. Doesn't make any sense at all for me. For credit cards you'll at least get some value for your money - convenience, additional fraud protection, etc. The end result will be the same.

Usually the credit starts to build up after ~6-12 months (that's why after a year your secured CC will be converted to a regular one).

Make sure to have the statement balance in the range of 10-30% of your credit limit, to get the best results.

Would it make much better sense to wait till I get a job (then I would have a fixed monthly salary and can apply for a regular CC directly)

You can apply, but you'll probably be rejected. As I mentioned in another answer elsewhere, the system in the US is such that you're unable to get credit if you don't already have credit. Which is kindof a magic circle, which you can break with the secured credit card as the least costly solution.

Answer 2

I would like to post a followup after almost a quarter.

littleadv's advice was very good, and in retrospect exactly what I should have done to begin with.

Qualifying for a secured credit card is no issue for people with blank credit history, or perhaps for anyone without any negative entries in their credit history.

Perhaps, cash secured loans are only useful for those who really have so bad a credit history that they do not qualify for any other secured credit, but I am not sure.

Right now, I have four cash secured credit cards and planning to maintain a 20% utilization ratio across all of them.

Perhaps I should update this answer in 1.5 years!

Answer 3

I think you should try to talk with the credit union at your campus first, they may have offer you a credit card even you don't have any credit history.

Answer 4

I came to US as an international student several years ago, and I have also experienced the same situation like most of the international students in finding ways to build credit history. Below I list out some possible approaches you may want to consider:

I. Get a student job at campus (recommended)

I think the best way is to get a student job in university, say a teaching assistant or student helper. In this case, you can be provided with a social security number and start to build your own credit history.

II. Get credit card

You can also consider to apply for a credit card. There are indeed some financial institutions that can provide credit cards for international students with no or limited credit scores requirement, say Discover and Bank of America. However, it is relatively hard to get approved, simply because hey may put more restriction in other aspects. For example, you may be required to keep sufficient bank balance above several thousand dollars during a period of time, or you should prove that you have relatives with citizenship in US who can provide your financial aid if needed.

III. Apply for a loan (recommended)

Getting a loan product is another alternative to get out of this difficult situation, but most of people don’t realize that. There are some FinTech start-ups in United States that specifically focus on international students’ loan financing. One representative example is Westbon (Westbon ), an online lending company that specializes in providing car loan for international students with no SSN or credit history. I once used their loan product to finance a Honda Accord, and Westbon reported my loan transaction records to US credit bureau during my repayment process. Later when I officially got my SSN number, I found my credit history has been automatically synchronized and I don’t have to start from all over again.

It never be an easy journey for international students to build credit history in United States. What approach you should make really depends on you own situation. I hope the information above can be useful and good luck for your credit journey!

Answer 5

There's an excellent new service called SelfScore that offers US credit cards to international students. They work with students without a credit history and even without an SSN by using other qualifying factors such as major, financial resources in their home country, and employability upon graduation.

Worth clarifying: it's neither a secured credit card nor a prepaid card. It's a proper US credit card with no annual fees and a relatively low APR designed to help students build US credit. The spending limit is relatively small but that probably doesn't matter for just building a credit history.