If you're moving to the US, one of the most important things is to build your credit score. But there is another question - how much time does it take for you to build your credit score, and what are some of the things you can do? That's what we will tackle in this piece.
Time is the essence
Building a US credit score requires making a certain number of credit card transactions and paying your dues regularly. As someone who is just moving to the US, this requires you to start building your credit score from scratch as your Indian credit score isn't valid there.
It usually takes about six months to start building your US credit score. Note that it takes this much time for you to generate a score. If you want to build a good credit score, it will take more time. This means you must practice good credit behavior from day one.
In a nutshell, this involves building a record of timely payments. You will mainly incur shopping bills, rent, and utility bills in your first few months. When someone asks for your credit score, they send a request to one of the major US credit bureaus in the US. The bureau then analyzes it and generates a score (credit score). Any score above 670 is considered a good score. But remember, it takes some time to build it good.
What does your US credit score consist of?
Here are some guidelines by FICO that tell you how your US credit score is calculated:
- 35% is based on your on-time payment record
- 30% is based on credit utilization
- 15% is based on length of credit history
- 10% is based on credit mix
- 10% is based on recent borrowing inquiries
As someone just starting to build their credit score, you need to focus on paying bills on time, keeping your credit utilization low.
Things you can do to build your US credit score fast
Pay your bills on time: Considering this has the most significant impact on your score, this is a no-brainer. Keep reminders to pay bills on time and pay off bills in full if possible.
Keep your credit utilization within limits: The whole idea of having a credit card is to be allowed to buy things and pay later. But this means you need to be able to pay them later. In this regard, it's helpful for you to understand credit utilization better. An ideal credit utilization ratio is around 30%. That is if your credit limit is $5,000, you can spend up to $1,500. It helps to have a budget as it can stop you from overspending.
Pursue variety: It's a good idea to have more than one credit card, and creditors like to see a healthy credit mix in your portfolio. This shows them that you can manage different types of debt.
Don't close accounts or cards prematurely: One way to go about this is not to open too many cards or bank accounts.
What not to do to build a US credit score
Missing payments: This is a surefire way to affect your credit score negatively. Once this becomes a habit, you'll find it harder to play catch up.
Maxing out your credit card: This is a major red flag for prospective lenders as it tells them you find it hard to manage your money. So always keep your credit utilization ratio in check.
Closing cards and accounts prematurely: Each time you close a credit card, it's not good for your credit score. So make it a point not to apply for too many cards in the first place.
Build your credit score from Day One
You can apply for a Zolve US Credit Card and US Bank Account from your home country, no SSN or US Credit Score required. The application process takes just 5 minutes. The best part? You can start building your credit score from day one.