Credit scores: tips for building (or rebuilding) your own

Moving to another country can be a beautiful experience. It can offer a new perspective, opportunities for personal and professional growth, and immersing oneself in a new culture. But at the same time, it can also be challenging.

One such hurdle is building a credit score, which can be crucial in achieving financial stability and independence in the United States. As an immigrant from Latin America, I had little knowledge of the important role credit cards play in building your credit score in the U.S., and had to learn the hard way.

In my home country, a credit card is not required to build credit, as the primary way you demonstrate financial responsibility is by paying your bills on time. However, in the U.S., credit scores play a crucial role in many aspects of life, from renting an apartment to buying a car or a loan, and the primary way to build your credit score is by owning a credit card.

It wasn’t until I decided to buy a car that I realized how important credit score really is. I had been saving up for months and was excited to be able to purchase my own vehicle finally. But when I went to the dealership, I was told I had no credit score. I didn’t own a credit card and had never taken out a loan, so I didn’t have a history of borrowing money and repaying it on time.

I was stunned. I never thought that not having a credit card would be a problem. I felt everything would be fine as long I had the money to pay for the car. Without a credit card, I didn’t have a credit score, and lenders saw me as a risk.

It was a funny moment, looking back. But it was also a wake-up call. I realized I needed to understand the importance of credit scores and start building my own. So I did. I applied for a credit card and made sure to pay off the balance in full every month, and I kept a close eye on my credit report to make sure that everything was accurate. Slowly but surely, my credit score started to improve.

Now, years later, I have a solid credit history and understand how important it is. It’s not just about being able to buy a car, rent an apartment, or buy a house, but it’s also about having the financial freedom to make choices and pursue opportunities.

Whether you just moved to the U.S. or you are looking to rebuild your credit, no matter your experience, there are ways to build or rebuild your credit score. Here are some of the most important steps you can take:

Check Your Credit Report

Start by checking your credit report to see where you stand. You can request a free credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) once per year at AnnualCreditReport.com.

Dispute Errors

If you find errors on your credit report, dispute them with the credit bureau reporting error. These errors can have a negative impact on your credit score. You can do this online or by mail.

Pay Your Bills On Time

Your payment history is the most important factor in determining your credit score. Make sure to pay your bills on time, every time.

Reduce Your Credit Utilization

Your credit utilization, or the amount of credit you’re using compared to your total credit limit, is another important factor in determining your credit score. Try to keep your credit utilization below 30%.

Apply For New Credit Sparingly

Applying for new credit can temporarily lower your credit score, so limit the number of credit applications you submit.

Consider A Secured Credit Card

You can request a secured credit card in case you’re having trouble getting approved for a traditional credit card. With a secure card, you’ll make a deposit that serves as your credit limit, which can help you build credit over time.

Become an Authorized User

If you have a friend or a family member with good credit, you can ask them if they can add you as an authorized user to their credit card account. As an authorized user, you’ll get credit for their good credit habits. When you are an authorized user, you can use a credit card issued to someone else on your behalf. Your account will be linked to a credit card. With this setup, you are not legally obligated to make payments towards the credit card bill since the responsibility remains with the primary account holder.

Be Patient

The length of time it takes to build or rebuild your credit score varies depending on how serious your credit issues are. If you have no credit history, it could take six months to a year of on-time payments and responsible credit use to build a good credit score.

On the other hand, rebuilding your credit score could take a year or longer if you have a poor credit score due to missed payments.

Don’t get discouraged, be patient and keep making progress. Building or rebuilding a credit score requires consistency and responsible credit behavior.