There’s a lot going on when you arrive as a newcomer. Here’s our guide on how to build great credit as a newcomer. While you focus on essential areas like finding a place to live or what jobs are available, do not forget to set yourself on the right path to prepare for your financial security. By building a great credit as a newcomer, you can unlock avenues to get ahead financially. The journey will not be quick but starting off with these 3 essential actions will put you on the path to building great credit.
Steps to Build Great Credit as a Newcomer
Step 1 – Open a Bank Account
When moving to a foreign land, you may have liquidated all your prior assets. Resist the temptation to use the money on anything and everything. Pace yourself and start defining your financial goals. By opening a bank account, you can protect the assets you have brought into the country and set yourself up for success when you have obtained your first employment. Once you have your first job, they will require a direct deposit. By having a bank account, you are able to receive income and start your credit journey.
Your relationship with your bank will be an ever-lasting one. Make sure to shop around and browse the newcomer bank account packages offered by each financial institution. Pick the bank account that suits your needs and financial goals.
Step 2 – Get a Credit Card
When shopping around for bank accounts, also browse for a credit card. A credit card is a perfect opportunity to build great credit as a newcomer. Make sure that you pay your credit card back in full each month. By continuously paying your amount due each month, you increase your creditworthiness.
Avoid shopping around for too many different credit cards as each credit card application is a “hard check” which does affect your credit. You can get a secured credit card with your bank. For the secured credit card, you must place a deposit that will be your credit limit for each month. When you continue to pay back the amount in full each month, your creditworthiness will increase.
As a newcomer, here’s two golden tips with credit cards:
- Pay your bills on time!
- Keep your credit utilization under 30%.
- Your credit utilization is the amount of credit you’ve used versus the amount of credit available to you. For example, you spent $1000 and your credit limit is $5000. Your credit utilization would be 20%. The credit utilization contributes to your credit score and is available on your credit report.
Step 3 – Get a phone plan with automatic bill payments
An important need in today’s age is our cellphones. As a newcomer, this might be one of the first utility items you sign up for. Make sure to shop around for the best offers and resist the urge to buy these plans at the airport. They will be much more expensive and you will not have the time to fully understand the details of this monthly expense.
When you have purchased your phone plan, set up automatic bill payments to your credit card or debit bank account. This will assure that you pay on time and in full to build great credit as a newcomer.
For more information about how to understand credit and debt or how to invest, check out our Personal Finance Guides.
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