Many people who intend to relocate to the United States do not realize that their positive credit history won’t travel with them because in general, credit history does not transfer from one country to another. It is important to build credit in the United States in order to qualify for loans, credit cards, and other business activities that require creditworthiness.
What is Credit?
“Credit” is when one party, usually a bank or similar lending institution, provides money or resources to another party without immediate reimbursement. Credit is generally provided with interest fees and/or other arrangement expenses. A lender will look to the creditworthiness of prospective borrowers before extending a line of credit.
“Creditworthiness” is a measure of a borrower’s ability to pay back debts. In the United States, creditworthiness is measured by a “credit score,” which is calculated by three private credit reporting agencies: Equifax, Experian, and TransUnion. Lenders report a borrower’s activities to these agencies, and in turn, these agencies assign borrowers a credit score which fluctuates with his/her debt and financial activity.
A positive credit history is established when a borrower maintains a track record of paying debts on time. Conversely, a borrower’s credit history will be negatively impacted by missed or late payments, closed accounts, and over-utilization of credit.
What is Credit Used For?
In the United States, credit is used in almost every aspect of daily life, in both the personal and business spheres. A positive credit rating will allow a borrower to:
- Rent a home or apartment
- Qualify for a home mortgage
- Get an automobile loan
- Set up utilities and cell phone contracts
- Procure more favorable insurance rates
- Get approval for credit cards, small business loans, and other lines of credit
How Can I Get Credit in the United States?
Unfortunately, the solid credit history you built in your country of origin probably won’t follow you to the United States. To establish a new credit history in the United States, you may want to:
- Get a social security number, which will assist you in being approved for credit and make credit reporting easier for your lender;
- Obtain a secured loan from the bank where you hold a checking or savings account;
- Obtain a secured credit card, which is a fully functional credit card that requires an advance security deposit;
- If you had a credit card in your country of origin, ask that company if they also issue credit cards in the United States; or
- Ask a friend or family who already has established credit in the United States if they will co-sign with you on a loan or credit card account.
Once you have established a positive credit rating, it will be much easier for you to acquire the resources necessary to pursue your entrepreneurial goals.
What Other Considerations Should I Keep in Mind?
- Don’t keep your foreign accounts a secret from US lenders or the IRS. If the IRS finds that you have undisclosed foreign accounts or assets, you may be subject to huge penalties. See our article on FBAR reporting.
Still Have Questions About Credit in America?
If you have questions about how these factors apply to your business, a licensed attorney can help you prepare to open a business in the United States. In addition, the Grady Firm’s immigration and business law departments can assist with preparing immigration applications, business advising, and contract drafting.
The Grady Firm has offices in Los Angeles, San Francisco, and San Diego, California, and serves employers throughout California.
*This article is for informational purposes only, and does not constitute legal advice or create an attorney-client relationship.