Credit is one of those puzzles that everyone who moves to the United States comes across, and the internet is filled with ridiculous amounts of (sometimes terrible) information. Everything below is from my personal experience combined with speaking to as many professionals as I can possibly meet.

Credit. Is. Important.

It’s one of the first things you should start thinking about when you arrive, and it will haunt you at every turn.

What is a credit score?

You will have attached to you (and your SSN) a report, and a “FICO” score from three major credit bureaus (Experian, Equifax, and TransUnion) who collect data from banks and other sources.

What’s a credit score for?

It’s accessible to anyone who wants to give you something that involves credit (e.g. Banks) or relies on you for something (e.g. Rentals). This score is from 350 to 850 (!?) with anything below 550 being “Bad” and anything above 700 being “Good” or “Excellent”.

How do you build good credit?

Your score starts building when you have your Social Security Number because your credit history then has an identification to attach to. It’s important that you maintain this as best as you can because, without a good one, you’re going to struggle to have any institution trusting you.

It’s important that you maintain this as best as you can because, without a good one, you’re going to struggle to have any institution trusting you.

The key factors or things to remember about maintaining a good credit score are:

  • Building credit as early as possible (“age of credit history”) is important (longer = better, and this only applies to credit accounts, not checking/savings);
  • If someone asks for a “Hard pull” or “Hard inquiry” on your credit, really be sure that it is essential. It effectively means they want more than just a number, and every time someone does this, it affects your score negatively (slightly);
  • Credit utilization basically refers to the percentage of credit you are using of what you have available. You want to keep that below 10% where you can (e.g. If you have a $500 credit limit, only use $50 of it);
  • On that, it’s also relevant how many credit facilities you have. You want to keep it relatively low, but everyone will have a different opinion of what is ideal here (I would suggest ~3).
  • On-time payment history is essential. Don’t be late on any money you owe for any reason;
  • The number of bad marks against your credit. Pay your bills, on-time, and frequently; and
  • Your income does play a part and obviously, this one isn’t as easy. In very short: The more money you earn, the higher amount of debt you’re basically allowed.

Other important notes:

  • Opening and closing checking and savings accounts do not affect your credit, but opening and closing lines of credit can potentially impact things; and
  • Paying off phone bills does not improve your credit, but using your credit card to pay them and paying off your credit card does.

Edit: I’ve also written an article about how to get a credit card without a credit history!

Katherine from Bright Lights of America has written a great article all about this too:

Building your US credit history