Get a 750 credit score as an inmigrant. In one year. For free.
One of the first things that you need to take care of when you first arrive in the States is your credit score. After reviewing a bunch of YouTube videos, podcasts and blogs I have not yet found an easy and to the point step-by-step guide on how to achieve a good credit score fast as an immigrant.
In this post I am going to teach how you can do it. For free.
Please bear in mind that this is not financial advice. I am just a random guy on the Internet telling what has worked for me.
Why you need a good credit score in the first place
If you have never been in the US and you are coming from a country that does not have any type of credit score (like Spain) you may be wondering, what is this thing called credit score? Why do I need one?
In my experience it serves three different purposes:
- Rent an apartment
- Get a loan
- Buy a house
At the end of the day, the credit score measures how reliable as a borrower you are. The higher the score the better. Simple
What influences your credit score
If you start reading online the documentations about this is just endless. I am not going to try to nail down the exact percentage that each one of the factors that I am going to explain below affects your credit score. I just want you to have a general understanding.
The general opinion is that your credit score gets affected by the following factors:
- Payment history
- Credit usage
- Credit history
- Credit mix
- New credit
We are going to focus our attention on the ones that we can control: payment history and credit usage.
General approach
As I said at the beginning we are going to get this credit score increase for free. In order to do that the only way (that I know) is by using credit cards.
Before we dive into the nitty-gritty details I would like to clarify something. We don't want to end in with credit card debt for two main reasons:
- Credit card debt is probably the worst type of debt that you can have. The APRs are just insane (we are talking +20%). That would completely defeat the purpose of what we are trying to achieve here.
- If you carry debt that would mean that you are not paying off your credit card every month. If you do that your credit utilization is not going to be at the levels that we want to be and you won't get that 750 that we are shooting for.
To avoid that you are going to follow this very simple approach for every single card that we open:
- Activate automatic payments. We are all humans and we forget stuff. We want to make sure that our payment history is as clean as it can be.
- Look at your closing date. You can find that on your online account when you check your credit card. You are going to put an alarm in your phone or wherever you fancy 3 to 5 business days before that date. When that alarm hits you are going to make a payment to make sure that whenever we close we have an utilization rate of 1%. For example, if we have a $250 credit limit we are going to make sure that the balance is $2.5. Then we are going to monitor how long it takes for that payment to get posted on our account so we can adjust those 3 to 5 business days. Please do not use that credit card anymore until the closing date.
Easy, right? Let's go to the credit cards.
Cards to apply for and when
Full disclaimer: One of the first things that I did after I got my SSN was to open a bank account with Chase. Did this helped? I don't know but there is some people that thinks it does.
Credit card No 1
At the very beginning you are going to have a perfectly clean new SSN that nobody wants to lend money to. We are going to use a small loophole to speed up the process. We are going to use a secure line of credit. Let me explain.
There are certain companies that let you open a credit card with relatively no questions asked as long as you provide your credit limit on cash upfront (so they have no risk). They will keep that money until they feel that they can trust you. For example, if I want a credit limit of $250, I would have then to provide that money to the credit card issuer and then they will send me that card.
For that I recommend the discover secured credit card. It's a free to maintain credit card that I recommend you keep forever.
In case it's useful for you as a reference. I got this up and running in less than a month after I landed in the US .
Credit card No 2
As I said in the beginning of this section, one of the first things that I did when I first arrived was opening a bank account with Chase.
I am also impatient. I don't know if I got lucky but one month after having my brand new discover card I applied for the Chase Freedom flex and got accepted.
Why did I choose this card? Because It gets me a 1.5% on everything that I buy. I will probably cover this in another post explaining my immigrant credit card set-up.
Credit card No 3
I promise you, we are about to finish.
Our next card card is going to be the American Express Blue Why? There are three main reasons:
- It's free.
- Credit history is one of the factors that affects your credit score. If my three first cards are with three different banks I ensure that I will have at least one old account in the future.
- I can get a sweet 3% back on groceries (more on that on another post).
How much did I wait to apply for this card? I got it 3 months after the Discover.
Wrapping up
Are you guaranteed to reach 750 after one year if you follow these steps? No, but you will probably be so close that you can be in a position to do something like I did: buy a house in the US.
