Most international students falsely believe they don’t need to build excellent credit score while studying in USA.
To some extent, they are correct. If they’re planning on leaving the US immediately upon completion of studies, they definitely don’t need a credit score. And if they’ll be getting ample money from home to support studies and every other expense and don’t ever need to avail credit while in USA.
These scenarios are impossible for majority of international students in America. Hence, they’ll need an excellent credit score. And they’ll have to build it with own efforts. For the uninitiated, I’ll start by explaining what’s credit score and its importance to students in USA.
Understanding Credit Score
In simplest terms, credit score is a three-digit figure given by an authorized credit ratings agency. This agency calculates your credit score based on various factors such as income and spending, loans and borrowings as well as timely repayment of bills and credit of all sorts.
Your earning, spending, borrowing and repayment patterns is known as ‘credit history’. A credit ratings or credit reporting agency such as Equifax, Experian and TransUnion gets your credit history. And depending upon this credit history, the agency assigns you a credit score.
A credit score of 300 is lowest and 850 is perfect, under current American credit ratings standards.
Importance of Credit Score
An excellent credit score isn’t necessary only for borrowing money or availing credit. It’s vital for several other purposes too.
- Employers check credit scores to find whether a candidate is financially responsible. A poor credit score can often be misconstrued as having several outstanding bills and possibly loan or credit card default.
An employer could also reject a job application if you’ve no credit score. These situations can have long-term impact on your career since you might miss getting experience vital for a profession and the course you complete would remain a mere degree.
- Availing postpaid cable TV or other services. A service provider can charge more if your credit score is low or doesn’t exist to cover possibilities of future default and leaving country leaving bills unpaid.
- Renting an accommodation outside your campus can also prove difficult unless you don’t have a good credit score or don’t have one. A landlord would definitely want to view your credit score before letting out a place.
Since a credit score holds such immense importance, it’s vital you build one. And build a good one too.
How? Continue reading.
Building Credit Score as Student
There are several simple yet time-tested and proven ways that you can build credit score as student in USA. Here they are.
Open Savings Account
This is the most important element to build credit score as student in USA.
You’ll need a proper address before opening a savings account in USA. This can prove fairly easy provided you’ve a residential address in America. Usually, students arrange for accommodation before arriving, hence you wouldn’t face much of a problem in opening a savings account.
Here we’ve two choices: a savings account with bank or credit union. Your landlord, classmates or officials at the educational institute can provide some vital inputs about best places to hold an account.
Get Secured Credit Card
A secured credit card simply means that you’ll have to deposit some money upfront to get one. If you fail to repay, the credit card issuer can forfeit your deposit. However, a secured credit card is an excellent resource to build excellent credit. You can get such cards with security deposits as low as US$50.
Spend with your secured credit card but make sure you pay the outstanding amount before due date. Timely repayment of credit card dues, albeit on a secured ones, works miracles for a credit score. In fact, it helps you get a credit score and develops credit history.
Timely Bill Payments
Paying every bill, including house rent on time is another simple way to build credit score as student in USA. Having a savings account makes it simple. The trick here is to avoid paying cash and instead, use banking channels.
Most banks and credit unions have apps. Add your utilities providers and other companies that you’ve to pay regularly as billers on the app or through their website. When you’ve added companies and people as ‘billers’, the bill usually goes directly to the bank or credit union for payment. The financial institution pays the bill on time, provided there’s sufficient funds in your account. A history of timely payments is another surest way to build credit score as student in USA.
Yes, as international student in America, you can invest too in specific plans. Ask your banker or a financial advisor at credit unions to guide you on low cost investments options for foreign students. There’re quite a few. Investment apps also make possible for you to stash away a few Dollars aside every month in investment plans.
It’s common sense: having a few investments means you’re building wealth and have a couple of financial assets. Means, you’ve some degree of liquidity in personal finances. It’s also a clear indicator of responsible finance management. And this works wonders to build your credit score. Look for investment apps such as Robin Hood and iBillionaire: they allow you to invest as little as US$5 in superb plans and schemes. Check if you’re eligible for investment as international student before putting money.
Don’t Avoid Credit
And finally, don’t avoid credit. Unless you’ve some credit, it’s impossible to get a credit score. It’s not borrowings or credit that impacts your credit score adversely: it’s your timely payments and proper handling of money.
If possible, get a secure store credit card, postpaid services and if necessary, a small student loan. Some of these may require an American cosigner. You could ask your landlord or any US citizen to become your cosigner, though it may prove difficult in some cases. Yet, it can be done. And pay off credit on schedule.
It’s important to build credit score as student in USA if you’re serious about your career. A good credit score can open doors to a wonderful job that can provide skills matching your course. And you might get some student loan for studying another course that enables you to get better qualifications. When you build credit score as student in USA, you’ll also learn doing the same upon returning to your native country. Credit scores are integral part of life in America. You too can participate in this by using the above tips.