How Can an International Student Build Credit?
We have previously discussed personal loans and what an international student might use them for. Personal loans can be used for a wide variety of reasons. Last week, we talked about where an international could possibly get a personal loan from, including banks and credit unions. Today, we will discuss how international students can start to build credit. For more information on building a credit package, please follow this link.
What is Credit?
Credit is typically defined the ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future. In turn an international student can build credit by showing an ability to pay sums that are due. By having good credit, banks and other lending institutions are more likely to lend money to you.
How Can I Build Credit?
The earlier you join a bank or a credit union, the easier it will be for an international student to build credit. The first step you should take towards building credit is by opening a checking or savings account at a bank. Keep in mind that checking and savings account do not affect credit scores; rather, lenders can review these accounts to analyze your fiscal responsibility. For example, a potential lender could see that you pay your bills, such as rent, on time.
Another option is to apply for an international student credit card. There are two types of credit cards: secured and unsecured. With an unsecured card, generally, you charge as you go and then you receive a bill at the end of the month with your outstanding balance. However, for those with little to no credit history, especially international students building credit history, there are secured credit cards. With a secured credit card, it works the same way with purchasing, but they get paid off differently. With a secured credit card, your credit limit is equal to the amount of money that you have secured against it. You still get a bill at the end of the month, so do not get this confused with a debit card. The more you use and consistently pay off your credit card, the more your credit can build so that you can possibly get an international personal loan if necessary, or even an unsecured credit card.
Another way to build credit is to show that you can consistently pay your full credit card bills and loan repayments (if applicable) fully and on time. Generally, in order for an international to establish a credit history, they need to have an account open for at least six months. This is why it is important to join a bank or credit union as soon as possible to build strong, consistent credit habits, but also to establish a credit history as soon as possible.
Another option for international students to build credit is called a ‘credit-builder loan’. Larger banks generally do not offer these, as they are more commonly available at smaller banking institutions and credit unions. A ‘credit builder loan’ (they have many names) is a loan where the money that you borrow is deposited into a savings account. However, you cannot access that savings account until the loan is repaid in full. Then, once the loan is fully repaid, you have access to the account, and it reflects good credit onto you. Remember to pay the installments in full and on time.
Please keep in mind that building a credit history takes time and patience. As long as you pay what is due on time and in full, eventually, you will have built a strong credit history.
While it may be harder for a non-U.S. citizen or H1B visa holder than a U.S. citizen to build credit and eventually get a personal loan from a lender, there are options out there for you. If you’d like to learn more and/or search for potential personal loan options visit our main site, at Nomad Credit or email us at firstname.lastname@example.org and we can personally help you start your search.