When you are new to the United States, chances are high that you haven’t approached a financial institution yet for a loan. Your bank account in the US itself might be recent, which means that you are yet to develop a credit history in this country. Unfortunately, your credit report is something that most banks would consult before approving a loan application.
Getting a loan with no credit history can be the hardest thing on this planet, since the lender doesn’t know whether you are a good borrower or a risky one. In this case, lenders do not have any way to find out if you’ll be able to pay back the loan on time or if at all.
At least, the good news is that having no credit history is certainly better than having a bad one. Still, I would advise you to first look for tools that can help you build your credit score in America.
Credit Builder Loan
Taking a credit builder loan is the most powerful strategy for newcomers with no credit history. In a credit builder loan, you borrow a small amount of money from the lender. The catch is that you don’t actually receive the money. Instead, the amount is transferred to a savings account, on your behalf. Now, every month, you’ll have to make timely payment towards the loan, which will be reported to the credit bureaus by the lender. Eventually, your credit score will rise. Once you have paid back the entire amount, you will receive the loan amount.
A good option for a credit builder loan is: Self Lender
Credit score is nothing more than a report of how you manage debt, regardless of whether it is in the form of a loan or credit card bill payments. Credit cards are actually the quickest and possibly the most effective way to build a good credit history. I believe that this could also take care of any small monetary requirements you might have. However, you’ll have to use the credit card responsibly and pay all bills on time. If you pay in full, you won’t even need to pay any interest. The issuer of the credit card will report your payments to the credit bureaus, which, in turn, will use such reports to establish your credit score.
Here are some good options for credit cards that don’t require you to have a minimum credit history:
- First Progress Platinum Elite MasterCard® Secured Credit Card
- Green Dot Primor® Visa® Gold Secured Credit Card
- UNITY® Visa Secured Credit Card
Another great option to get yourself a small amount of money without any credit score is to contact the Federal Credit Union and ask for a payday alternative loan. Here, you can borrow money up to $1,000 for a tenure of 1-6 months.
To find similar products, you can also look at state and private credit unions. However, double check with your credit union whether they will report your on-time payments to all three credit bureaus, else paying back the loan on time will not be of no use to your credit score.
An exception to this is Stilt. Stilt is a provider of loans to immigrants, non-US citizens, international students and F-1, OPT, H-1B, TN, O-1 and L-1 visa holders. It is the best option for newcomers to the US, with no credit history. Such a loan can help you get a kickstart to building a credit history, since they take into account various other factors to determine your creditworthiness.