Establishing A U.S. Credit Score As A Foreign Exchange Student
Credit scores are a very important part of American culture and, if a person plans on being in the United States for a long period of time, it may be possible to establish a credit file. If a file is established, it is then important to keep an eye on the score because it could be beneficial in a number of ways.
Exchange students visiting the U.S. who will be here for the long-term wonder if they will be able to establish a U.S. credit score despite the fact they are not U.S. citizens. The fact is that it is possible for a foreign exchange student to obtain a credit score. In fact, many students may already have one without knowing it. This is because there may have been a bill or another expense that moved forward with reporting your payments to the credit bureaus. Sometimes it is surprising what is reported and what is not reported to the bureaus.
The reason why foreign exchange students worry about credit scores is because they want to eventually buy a home or a car. Buying a home is the most common reason why individuals want to boost their credit scores. If you are an exchange student who will be studying in the U.S. for at least the next four years, you don't want to wait four years to build a credit score. If you decide to go to graduate school, you could be here a lot longer and this means a good credit score could make a significant difference for you.
Importance Of A Credit Score
The reason why the credit score is so important is because employers, insurance companies, and lenders will look at your score. If you ever plan on applying for a job, you need to have credit established. If you plan on financing a vehicle and getting insurance for that vehicle, a good credit score is going to save you money on your premium and the score is going to open a lot of doors for you.
Credit Score Requirements
There is no requirement that says you have to be a citizen of the United States to have a credit score. If you have a tax identification number, you can establish a score. F-1 and J-1 students can apply for either a Social Security number or a tax ID number. Once this number is acquired, it will be used for many reasons. It is a number that identifies you within many agencies.
If you do not already have one credit card in your possession, consider applying for one that is designed to help first-time cardholders or those that are new to the United States. You don't have to have a high credit limit. As a matter of fact, a low credit limit can keep you from going into debt.
Some of these cards may require an annual fee or monthly maintenance fee since you may not have established credit yet. If that's the case, compare the terms and the interest rates to secure the best one.
After you receive the card, be very careful with it. You do not want to spend the available credit on the card just to establish a good credit history. You can do such things as buy a week's worth of groceries when you need to or put gas in your car to then pay off your balance before the grace period is up. Paying the entire balance before the grace period is up avoids the interest, so it is like using credit for free. In turn, the credit card company reports your on-time payment to the credit bureaus. Carrying a balance is not going to build your credit any faster.
Make sure you keep a low balance throughout the month, especially when you want your score to look really great. The reason why you want the balance to be low is because you never know when the credit card company will be reporting to the credit bureaus. It seems like the credit card companies report right after a person makes a major purchase. If you need to, make more than one payment in a single month to keep the balance as low as you can. The recommendation is to keep your balance at just 20 percent of your credit limit.
Credit Boosting Alternatives
Another way to boost your score is to speak with your cellular phone company, your landlord, and anyone else you make on-time payments to about reporting those payments to the credit bureaus. They are not obligated to do this, but it doesn't hurt to ask. It is important to note that if a major cellular phone carrier has made it a policy to not report, then they won't. Some of the smaller companies may do that for you, however.
Once you have a score and a steady payment history built up, you will need to diversify your credit. It can help to have more than just a credit card account. You need to be able to show banks that you can pay other types of accounts as well. This means taking out a small personal loan and then paying that loan on time. It will look great when you pay that loan off. This is a much better way of displaying that you can pay your bills on time than simply having multiple credit cards. If you have too many credit cards, a bank may tell you that you have too many revolving accounts. This means you will have to pay off credit cards and try again. If you do not have other types of credit on your account, you may be told that your credit profile is not diverse enough. This is why a small personal loan for something you need can be very useful.
Overall, it takes little effort to build a credit sore. All you have to do is keep your balances low and make sure you make your payments on-time. By doing this, you can easily build a credit score. Once you do, you will be able to build upon that and focus on other credit building methods that can secure a future car or home.
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