College should be a sort of last hurrah for your teen years. It’s your last chance to be an adult without having to worry about all that goes with it. Creditors, however, have other ideas for college students. To make things even worse, if you’re an exchange student thinking about staying in the U.S. after graduation, things are going to get even trickier.
When I first applied for my credit card, I was only approved for a $300 limit because it was “suspicious” that I had zero credit even though I lived in the States for over 3 years while attending university.
What’s the Problem?
Basically, creditors view people without any credit history as a risk. Without any credit history, you’re actually even worse off than you would be if you had bad credit history — which also seems dumb. Why won’t creditors give you a chance?
From the creditor’s point of view, they don’t know if you’re a risk or not. Are you a high risk and need a higher annual percentage rate (APR) or will you pay bills in a timely manner? Heck, without credit history, you’ll be even harder to track down if you run on your bills, and if you’re an international student, they have no guarantee you won’t just leave the country. How will they collect on your debt if you aren’t even living in the U.S.?
For a college student, all of this is particularly difficult because you probably aren’t holding down a full-time job, because you’re a full-time student. And if you wait until after graduation to start building your credit, you’ll quickly discover you can’t rent your first apartment or buy a car. Just when you thought you were free of your parents, you’ll discover you need them to co-sign.
It’s even worse for international students. If you plan to stay in the U.S. after graduation, you’ll need a U.S. citizen to co-sign. Mom and Dad won’t be able to save you — unless they’re U.S. residents.
So how do you build credit as a college student, especially an international one?
Secure a Social Security Number
You can’t build credit without something to attach it to, so if you’re an international student, your first step is to apply for a social security number. This isn’t the same number that you were assigned by your own country at birth, even though it represents the same thing.
You can easily obtain a U.S. SSN number by applying for an on-campus job in school. Just remember that there is a process to follow, and you have to do it in person. The Social Security Administration recommends you wait at least 10 days after you’ve arrived in the United States before applying, to help with your immigration status. Then, take an application to the SSA with the necessary documents.
For all students, once you’ve obtained your social security number, pull a credit report to make sure the number hasn’t been in use prior to you building credit. Identity theft can happen even when you’re an infant. If you pull your free credit report and see a mortgage added when you were 6 months old, you’ll want to resolve the problem before moving forward.
Credit Building Tips
• Pay your bills on time — that means all bills, not just credit cards.
• Pay your balance in full.
• Leave a line of credit open for as long as possible.
• Pull a credit report yearly
But Don’t …
• Apply for multiple accounts.
• Receive a card but never use it.
• Let balances compound.
• Co-sign for friends.
Where to Begin
If you have zero credit and no one to co-sign, start with a secured credit card. It’s definitely the path of least resistance. The only downside is you’ll have to cough up a few hundred dollars to open an account — this is how the card is secured — but on the other hand you’ll gain interest on the money you’ve passed to the bank. After a year of good behavior, you’ll get a “real” credit card and your money back.
Your only other option without help is to apply for student credit cards, but even though these cards are geared toward students, those without any credit history at all are often denied. Still, if you’re one of those lucky students whose parents have been helping them build credit in advance, this might actually be a preferred method.
Call in Backup
Even an international student can have a co-signer. If you need to develop credit but can’t seem to swing your first account on your own, call in family. Remember, though, if you’re an international student you still have to have a U.S. citizen co-sign. You might be out of luck; however, if you’re fortunate enough to know someone willing to do this for you, don’t mess it up. Your late payments can affect their credit history.
If possible, you can even ask your parents to add you as an authorized user on their personal credit cards. Only do this if you know your parents have positive credit, though. If that’s the case, their good credit will rub off on yours.
Map out a strategy for developing a solid credit history. It’s a slow process, so it’s important to start as far in advance as you can. Don’t wait until you’re ready to graduate to apply for your first credit card, and definitely don’t wait to make your payments. Your big problem right now is building credit, but don’t let your next one be learning how to pay off your debt.