If you’re an international student studying in the U.S. and you’re planning to stay here after you graduate, it’s wise to begin building credit. Your credit score is used to determine your creditworthiness when you apply to rent or buy a home, apply for a job, finance a car and more. These are all things you might do as you build your post-school life here, even if you only intend to stay in the U.S. for a few years.
If you use your time as a student to your advantage, you’ll finish college or graduate school well-situated to begin your adult life.
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Step 1: Get a Social Security Number
You’re not required to be a U.S. citizen to have a credit score, however Discover and some other credit card companies require a Social Security Number. Your Social Security Number will be tied to your credit history, and when you being working,Â they’ll be used by the IRS for tax purposes.
Step 2: Open a U.S. Bank Account
Opening a bank account in the U.S. will not only serve as the funding account for your eventual credit card, but it’s a secure place to save your cash, and, as a bonus, you’ll earn some interest on your savings.
Step 3: Get the Right Credit Card
If you don’t have an established credit history, many credit cards may not be available to you yet. But you do have a few options when you’re just getting started.
Secured credit cards are an option, as well, especially if you’re over 21 or don’t have a co-signer. When you sign up for a secured credit card, you make a deposit that will cover the credit card lender’s losses if you don’t pay your bill. You are given a credit limit that’s usually equal to the amount of your deposit. For example, if you want a $500 line of credit, you’ll need to provide $500 upfront. Once you’ve had this card for six to 12 months and have used it responsibly, you may be able to upgrade your secured card to a more traditional credit card. Talk to the bank or credit card issuer for more information.
Step 4: Use Your Credit the Right Way
The key to building a good credit score is to use credit responsibly. First, know your credit limit, and try not to spend more than 30% of it during each billing cycle. This keeps your debt-utilization ratio (the amount you charge divided by your total credit limit) low. Debt utilization is a factor in determining your credit score.
Start by only charging small and manageable amounts. Get in the habit of paying your bill in full and on time. As you get more comfortable, you can use your credit card more often, but be mindful of what you can afford to spend.
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Remember, a credit card isn’t an unlimited source of free money â€” it merely lets you borrow money for a short time. If you don’t pay that money back, you’ll have to pay interest, and that can cost you hundreds or thousands of dollars in the long run. As you establish a longer credit history, you’ll eventually be eligible for different kinds of credit cards that offer higher credit limits and greater rewards.