Can I Apply For A Credit Card Or Buy A House With A Green Card?
The American Dream is something you’ve probably heard of and many are working hard to attain. Whether you are a U.S. citizen or a new immigrant, it is important to build your credit to help you open doors to apply for a credit card or buy a house with a green card. The fact that you are thinking about building good credit as a new immigrant shows that you have initiative and believe that your financial future is important.
The vast majority of US residents have either okay credit or bad credit. If you want to avoid this financial black hole, you will need to educate yourself on how to build your credit in the United States from scratch. This is actually a blessing in disguise because you are starting with a clean slate instead of trying to repair or fix your past credit. In my situation, I had great credit in Canada and wished that I could bring it over, but I too had to start from nothing and now have fantastic credit.
How To Get Your First Credit Card As A Green Card Holder
Okay, I am not going to tell you that it will be easy to get a credit card when you have no credit history. After all, banks don’t want to take a risk on someone that has absolutely no track record. This is a situation that many new green card holders find themselves in, and it can be very frustrating.
But, don’t give up just yet! One great way to start building credit quickly is to have your U.S. spouse add you as an authorized user. However, there is some risk by being added as an authorized user so you will need to be careful with this option:
- Your spouse has a good credit – Great! have them add you as an authorized user. Their on time payments will be reported to the credit bureaus on your credit report.
- Your spouse has bad credit – Unfortunately, this will actually damage your credit if they have missed payments or are over their credit limit. Do not add yourself as an authorized user.
- Your spouse has no credit – If they also have no credit, this will be tricky but not impossible. If they have a steady job and a checking account, they can speak with their bank to open a credit card account with you as a joint user.
As you can see, it will take a little bit of time and foresight to begin building your credit. Once you have been added to your partner’s credit cards, you will begin to build a solid credit report within 6 months. The actual FICO score will generate after 1-2 years, but you will be able to apply for your own credit card within 6 months of being added as an authorized user.
Another option you have is to apply for a secure credit card with a down payment, but I tend to stay away from these.
Building Excellent Credit As A New Immigrant In The U.S.
Not only should your goal be to build up your credit, but, you should work towards having excellent credit (760+). Once you have attained this credit score, the banks will be begging you to apply for their credit cards. You will be considered a safe risk with a great payment history and credit management!
Sounds tough, right? Guess what? It’s actually much easier than you think. I was able to get my credit score above 750 in less than 18 months. I did it by opening 4 credit accounts after 6 months of being an authorized user on my husband’s accounts and now my credit score is actually higher than his (whoohoo!).
The keys to building excellent credit are:
- Always pay the full balance every month – the credit bureaus have changed the way that this affects your score now. Your credit report now shows which months you only paid the minimums.
- Always pay your balances on time – never ever miss any payments! The best way to handle multiple credit accounts is to set up auto payments with your bank.
- Always use less than 10% of your available credit – this is why I have multiple cards, you don’t want to use all the available credit on any one card. This can affect your credit score negatively if it looks you may default on the debt.
One of the biggest factors that will affect your credit score is time. Continue to make your payments on time and you will be on you way to excellent credit. The time it takes to show you have a stable track record with credit cannot be rushed. Slow and steady wins the race.
Getting A Home Loan As A Green Card Holder
Before you can apply for a home loan, you will need to have already built your credit. Some credit unions can do manual verification of your foreign credit but this is rare. Another important factor is a steady income so make sure that you have been at the same job for at least 2 years before applying for a mortgage.
Since the Great Recession, it became difficult for most Americans to get approved for a mortgage without a huge down payment. But fortunately, banks are beginning to loosen their purse strings and approving loans with as little as 5% down payment and okay credit scores.
Important factors banks use to qualify you for a loan:
- Credit history/score – they use this factor to see how likely you are to pay your mortgage on time every month for 15-30 years.
- Stable income – you need to show that your income is stable and likely to continue into the future.
- Good down payment – you need to have some skin in the game by putting some money down on the property.
- Debt-to-income ratio – no matter how high your income, you need to keep your debts as low as possible to get a mortgage.
I always recommend applying for a mortgage from a local credit union because they are more willing to work with you if you have okay to low credit score and a smaller down payment. Make sure to also have some extra money set aside as an emergency fund or home repair fund just in case something goes wrong after you move in. The worst thing to do would be to be “house poor” by using all your savings as a down payment.
That’s it, now go out there and use these tips to build excellent credit and get your financial life in order.