How to build credit history in the United States

Building credit history is the gateway to financial stability and building your wealth. Follow these tips to achieve it in the shortest time possible.

Accessing personal loans, business loans, mortgages or any type of financing is an excellent tool for personal and professional growth. These types of financial products allow you to access capital, which would otherwise take a considerable time to save.

Approximately 30% of applicants for financing are rejected, according to data from America's SBDC. One of the main reasons for not meeting the eligibility criteria is the lack of history and credit score.

What is credit history?

Credit history is a measure that establishes your ability to pay debts acquired with financial and commercial institutions. This record specifies the times you have requested and obtained financing, the types of tools you accessed, repayments, and amounts accessed.

In addition, they consider the order and discipline with which you have paid your debts (meeting dates and amounts), among other relevant aspects to identify if you are reliable to obtain and pay capital.

Institutions that offer financing products such as loans, mortgages, and credit cards use this to decide whether to grant capital. Credit history information also works for credit score generation, compiled by private companies such as Equifax, Experian, and TransUnion.

Credit score: a measurement tool for banks

It is a score between the number 300 and 850, the score is established according to credit history (open accounts, debt levels, payment history, and other factors). The higher the score, the greater certainty it provides to the financial institution that grants the financing.

By looking at your credit score, lenders don't have to review every detail of your history and can make their decision just by looking at your score. How can you have a good credit history or score, if you have never received financing?

Is building credit in the United States difficult?

There are several easily accessible financial products that allow the construction of good credit history. Here are some accessible options:

  • Personal loans

Obtaining these types of loans can be easy if you use the right financial institutions. Traditional banks are generally not friendly in this type of circumstance. We recommend you check out online lenders, which have options for people with no credit history. They generally offer high-interest rates, but if the loan amount is low and it is paid correctly in a short period of time, the investment will be minimal.

  • Store credit cards

This option is one of the simplest, since the requirements to access a store credit card are simple and, in many cases, do not require a credit history. It is extremely important to pay your monthly payments on time, as this will be reflected in your credit history and score, opening the way for you to access financing products for larger amounts.

  • Joint credit cards

If a family member has a good credit history and manages a credit card, you can ask for their help. You can apply for a joint credit card or they can give you an additional card to their main line of credit. In either case, it is a safe bet to build a good credit history.

  • Secured credit cards

These cards work as a kind of prepaid service. They require a security deposit that works as a guarantee of the line of credit. Usually, the owner of the card can have the same amount of the security deposit and in some cases, it has a lower APR.

  • Open a bank account

This step requires considerably more time since you will have to open an account and maintain a stable monthly balance, with constant income and expenses. In this way, a few months later you can apply for a personal loan or a credit card at the bank where you opened your account. For this alternative, it will be necessary to have an ITIN number, find out how to obtain it here.

Personal loans or credit cards obtained to create a credit history must be used with the utmost responsibility. It is essential that you have a stable source of income that guarantees the payment of your obligations.

In the best of cases, you can use the lines of credit to pay the same expenses that you already had within your budget (rent, food, services). In this way, you will maintain the balance of your personal economy.

Financing is a tool with which you can face personal and professional crises, but it is also the best ally of financial growth. Achieving a good credit history will help you get access to more capital, with better terms and interest rates. Begin building a solid heritage in the United States immediately.