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When you move to the United States, there are many things you can’t bring with you — your favorite restaurant, your family dog (probably) or the exact smell of the trees after it rains. Unfortunately, you also can’t bring your credit history with you.
This is no small thing. Having good credit smooths the way when you’re looking for housing, employment, a mobile phone plan and, in some cases, insurance — not to mention favorable terms when you apply for a loan. The first major hurdle is getting an American credit card.
Most reputable lenders in the U.S. report account information to three credit bureaus: Experian, Equifax and TransUnion. These credit bureaus act as storehouses of information, documenting the way millions of people use credit. FICO credit scores are derived from the data that these credit bureaus collect.
If you have never had any type of loan in the U.S., chances are you don’t have a credit history or a credit score. That’s why getting a credit card from a traditional issuer is such a challenge for international students and recent immigrants — even for those with a solid credit history back home, money in the bank and a job in the U.S.
Here’s a look at two companies offering credit cards to newcomers.
» MORE: What’s my credit score?
SelfScore: Designed for international students
Kalpesh Kapadia, once an international student himself, has set out to make credit more accessible to others who move here seeking a university education. He thinks the credit scoring system is “antiquated and unfair to people who are young and people who are new to credit,” he says. International students have gone through intense vetting just to get here, he says, so extending credit to them is a logical next step.
Kapadia is co-founder and CEO of SelfScore, a Palo Alto, California, company that offers credit cards to international students. SelfScore offers two cards, the SelfScore Classic Mastercard and the SelfScore Achieve® for Students. Both cards avoid foreign transaction fees. The SelfScore Achieve® for Students offers a higher credit limit, cash-back rewards and an introductory APR of 0% on New Purchases for 6 Months (19.74% variable APR thereafter), and then the ongoing APR of 19.74% Variable. (Applications for this card are no longer restricted only to international students.)
SelfScore looks at several factors when evaluating an application:
- Your identity. One problem traditional lenders have with international students is that these students often lack the kinds of identification that U.S. companies are familiar with, such as U.S. driver’s licenses and Social Security numbers. SelfScore asks applicants to supply their name, date of birth, school and major. They’re also required to upload a picture of their passport and visa. SelfScore says it verifies this information with various sources in a fast, behind-the-scenes process that results in a prequalification or denial in less than a minute.
- The stability of your identity. If your identity and your student status check out, SelfScore’s algorithms also look at how much your contact information has changed over time. Kapadia says the company is looking at how likely it is to be able to reach you, so it considers factors such as how often your physical address, email address and phone number have changed. It prefers an email address that is some version of your name and is tied to a university system. “If you say, ‘i’firstname.lastname@example.org,’ I’m not going to take that email address,” Kapadia says.
- Your ability to pay. Like any credit card issuer, SelfScore wants to be reasonably confident that you will be able to pay back what you borrow. To that end, it looks at applicants’ income and assets — with a twist. SelfScore also looks at your income potential, based on your course of study and other factors. Having a bank account in the U.S. is also a plus.
You don’t need a Social Security number or an individual taxpayer identification number to get a SelfScore card, and your account activity will be reported to two of the three major credit bureaus. SelfScore started offering credit cards in March 2016 and is accepting applications now.
ModernLend: For global citizens of all kinds
Shuo Zhang and Kobina Ansah came up with the idea for New York-based ModernLend after one of Ansah’s friends had trouble getting approved for a credit card because she didn’t have a credit file in this country. But Zhang and Ansah, former international students who graduated from the University of Pennsylvania’s Wharton School in 2015, decided not to limit their products to international students.
“Our mission is really to be a lender to creditworthy international citizens,” Zhang says. They estimate that as many as 5 million noncitizens living in the U.S. would meet their qualifications for a credit card. That includes students, people with H-1B work visas and permanent residents (people with a “green card”).
ModernLend expects to have its credit cards available later this year, potentially before the 2016-17 academic year starts in September.
ModernLend’s qualification process will be fairly similar to SelfScore’s, the founders say. The company will look at government-issued identification and verify applicants’ school or employer. It also will look at income, assets and employment background.
Ansah says ModernLend will report account activity to the credit bureaus so cardholders can begin to build credit and eventually get a FICO score. He says the credit cards won’t carry a foreign transaction fee, making them more affordable for cardholders to use when traveling outside the U.S.
Secured credit cards
If you do decide to seek credit through a traditional credit card issuer, a secured card may be your best option for building credit. These cards require cardholders to put down a security deposit. Usually, your deposit will be equal to your credit line, so a security deposit of $500 will get you a credit line of $500.
If you want to avoid the security deposit, a credit card specifically for international citizens might be a better choice.
No matter what type of credit product you intend to apply for, you can make the process easier by putting a few things in place. You will probably need a stable physical address, email address and phone number. It’s also a good idea to open a bank account as soon as you arrive. That way, you’ll have a debit card until you get approved for a credit card, and you can also start to document responsible financial behavior.
Using a bank account responsibly won’t build your credit, but for lenders like SelfScore, a bank account in good standing is key. Many secured cards also require you to have a bank account.
Not having a credit history is a major disadvantage. But Kapadia says, “We want to help these students to get on an equal footing.”