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How to build credit as a foreign H-1B or F-1 student

Prodigy Finance - April 30, 2019

Build your credit score

Plan to remain in the US after getting your international master’s degree from an American university? 

You’re going to need to build your credit.

That’s true whether you’re after a few years of work experience on the OPT extension of your F-1 visa, or you’re hoping to secure a Green Card after working on your H-1B visa.

Even better, you can save money on the total cost of your international student loan while building your credit. It’s a win all around, isn’t it?

Wondering how to get good credit score without credit history? Not sure if you need an SSN to get started? Whatever your credit question, we’re here to help you understand how to build your credit history as an international student or graduate.

Why is credit so important for foreign students?

Without a credit history in the US, you’ll find it’s exceptionally difficult to rent an apartment, buy a car – and in some cases, even get the job you want.

And because credit scoring and history are bound to geography, the progress you made in your home country means nothing once you cross international borders.

You’ll need to start from scratch. And, it’s never too early to get started.

From refinancing your international student loan to understanding what’s included in your credit score, you’ll learn everything you need to know here.

When can student visa-holders start building credit?

The best time to start building your US credit profile as an international student or graduate is always as soon as possible

This is because the length of your overall credit history is a primary factor for getting a higher credit score. 

It takes a while to build credit and achieve a score over 700, so you want to get going quickly.

TIP: You don’t need a social security number (SSN) to have a credit history, but it does make it easier. If you have authorisation to work in the US, temporary or permanent, you’ll be issued your SSN. Until then, don’t stop positive credit-building activities – they’ll still make a difference to your credit score.

Remember, just because you have an account reporting to the credit bureaus, you won’t necessarily have a credit score. VantageScore tends to be quicker than FICO Score (the latter requires six months of reporting prior to your first score), but both require some level of history for data to mean anything.

7 steps to build great credit in the US for H-1B and F-1 visa holders

Looking for help to build your credit history as an international student or graduate? Let’s get started.

More than anything else, it takes time to establish credit in the US as an international student or working graduate. But, of course, it also requires having some finances to manage. And, there are some specific, generally recommended steps to take to help you build a great credit score and your financial future in the States.

For example, you can pay off your Prodigy Finance loan. We report loan repayments to Experian in the United States and TransUnion in the United Kingdom.

1. Open a bank account

A local bank account is critical to establishing your credit profile in the US – even if your transactions aren’t reported to the credit bureaus.

Opening and maintaining an account will demonstrate a financial history with that bank in the future and that bank is more likely than another to offer you credit if you’ve been a loyal customer (and they can see your income and typical transactions).

TIP: If you’ve taken an education loan that transfers the funds – including living expenses - directly to your university (like a loan from Prodigy Finance), you will need a local bank account to receive your living expenses from your university. Spend some time researching banks in the area before picking one as you should be prepared to maintain the relationship with this bank for several years.

Check out this guide on how to open a US bank account for international students.

2. Make sure your rent is reported

In the US, rent is not automatically reported on your credit report because the information isn't directly handled by credit bureaus. However, Experian is now accepting rent reports and you’ll want to register with their RentBureau to make your off-campus housing costs count towards your credit score.

You’ll need to chat with your landlord and set up electronic payments to make it happen, but this can be a big credit booster if you’re making payments on time every month.

3. Think about getting a store card

Americans love shopping and there are plenty of stores that make it easier to do it with in-store credit accounts. You’ll find store cards are available at many national retailers and these are typically easier to get than general credit cards.

While the credit limits are unlikely to be high, carrying low balances and making payments on these accounts will do wonders for your credit history and score.

But, you’ll want to avoid gathering too many hard inquiries by applying for too many store cards at all your favourite shops, all at once. Try to open one or two, and opt for cards that you can use monthly, for groceries or clothing purchases you would make on a regular basis.

Reminder: If you're still studying, you should keep in mind that taking on additional debt before your second year could impact second-year loan approval.

4. Open a secured credit card

Getting a secured credit card is relatively easy because it’s not actually credit. Well, it is and it isn’t.

A secured credit card is a credit card because:

  • It’s used as a credit card with merchants that accept credit cards.
  • Your payments and balances are reported to credit bureaus.
  • You’re responsible for making the monthly minimum payments.
  • You’ll incur interest charges if you don’t pay off your balance monthly.

Secured credit cards aren’t credit cards because:

  • You need to make a cash deposit to get one.
  • Your credit limit is usually the amount you’ve deposited.

This form of collateral is why it’s easier to get one of these credit cards – and your first stop when considering your options is the bank you opened your initial account with.

While you won’t actually be given any credit, your purchasing activity will be reported to the credit bureaus, which can help build your credit up from nothing – as quickly as possible.

5. Consider a credit-builder loan

Similar to a secured credit card, credit-builder loans aren’t exactly a form of credit, but they’re great for credit reporting and, therefore, credit building.

It’s better to think of these loans as a rigid savings plan. You make deposits every month and you receive your loan amount at the end along with some interest (usually 4%-12%) and a healthy credit score – as long as your payments are reported. Make sure you double check this up front!

6. Get an unsecured credit card

Even though you’ll start receiving advertisements for unsecured credit cards almost as soon as you move to the United States, it’s unlikely that you will qualify without existing credit history. In fact, without a credit record in the US, you should be cautious about any credit offers from companies other than well-known sources such as banks or retail stores, as they may prove to be very expensive, dishonest, or entirely fraudulent.

You can sometimes get an unsecured credit card with a co-signer or by becoming an authorised user on someone else’s credit card, but you may not know anyone willing to take this leap for you.

But, when your credit is strong enough through store cards and secured credit cards, you’ll want to get an unsecured credit card.

TIP: Unless you’re paying unreasonable fees for the accounts you used to build a positive financial history, don’t cancel them all at once. The age of your relationship with lenders can positively or negatively affect your credit score – and longer is better in this case.

7. Refinance your international student loan

Student loans are usually substantial; moving these amounts from the currency of your home country to dollars already shows that you can be trusted with large credit balances. Plus, every time you make at least the minimum payment before it’s due, you’ll be strengthening that claim.

Refinancing is simply accepting a new loan with more favourable interest rates so you can pay off your existing student loans. It works because your degree and the job you accept post-graduation reflect positively on your credit profile.

What else can international student loan refinance help you with?

If you’re like most students (including American grads who often plan on refinancing their education loans once they get a job), you’ll save tens of thousands of dollars on the cost of your student loan. Plus, you can consolidate multiple loans, release co-signers and choose the loan terms that are best suited to your budget.

Grads with short-term education loans (less than 7 years) can use refinancing to extend their repayment cycle, effectively lengthening the time payments contribute to their credit history. At the same time, they're able to reduce their monthly repayment amount if desirable.

Most US banks and other credit providers are limited by the expiration date of your current US visa and the relatively large amount of student loans you carry. Because of this, you may need to look beyond the local options for companies like Prodigy Finance that are geared up to help international students refinance their loans.

Keep in mind that we're not able to refinance existing Prodigy Finance loans, though our predictive scorecard works to confer the best possible rates for current and future students.

What’s a credit score?

Credit scores in the US are generated by a number of different companies using the information gathered by the credit bureaus.

While you may think these differences will generate wildly different credit scores, they’re usually quite similar.

The US credit score scale

Whether you’re looking at a FICO Score, a VantageScore or a credit score determined by a different company, you’ll get a number that falls between 300 and 850.

On this scale, 850 is a perfect credit score and 300 is the worst. Typically speaking, anything over 700 is considered a good score. Anything less and banks are unlikely to offer you high credit limits or the most favourable interest rates.

The two most common credit scores are:

  • FICO Score
  • VantageScore

The differences between these scores are:

  • The company that generates them.
  • The formula used to compile your score.
  • Sometimes, the length of credit history needed to develop your score (FICO scores require at least six months of credit reporting on a single account before your score can be calculated).

You don't need to have a credit score to refinance your international student loan with Prodigy Finance. And, it's always a good idea to refinance sooner rather than later to save as much money as you can off the total cost of your loan. 

What affects your credit score in the US?

Considering everything that goes into your US credit history, it’s worth noting that each element carries a different weight when generating your credit score.

The weight of your payment history on your credit score is likely to be greater than the weight of recent credit inquiries, though how much importance is given to any element is determined by the agency doing it.

If you have questions about how any one of the credit score companies weigh the various elements, you will need to inquire with them directly.

What makes up a credit score?

Payment history: This is the percentage of on-time payments you’ve made that cover the minimum due. The higher the percentage, the better you look to creditors; they’ll see you as reliable and factor this into their credit decision. Late or missed payments are detrimental to your credit score.

Credit usage: This is the amount of available credit you’re using. For example, if you have $1000 available credit, but the balance on your credit cards is $300, your credit usage is 30%. The lower this percentage is, the better.

Hard inquiries: These are reports of new applications for credit. The more of these you have in a short period, the more damaging it looks to other potential creditors; it suggests that you’re desperate for funds, which makes your application appear high-risk.

TIP: Though most loan providers report applications as hard inquiries to the credit bureaus, Prodigy Finance doesn’t. You can apply for a Prodigy Finance loan or refinancing without your credit taking a knock.

Soft inquiries: These types of inquiries don’t impact your credit. Typically, this includes reports and scores generated for yourself, potential employers – and, yes, even Prodigy Finance loans and refinancing.

What doesn’t affect your credit score?

There’s a lot of information that doesn’t factor into your credit score or history. Companies and individuals checking your US credit score won’t learn:

  • Your age, gender or marital status.
  • Your salary or employment history.
  • Your race, ethnicity, nationality or religion.
  • Your savings or assets.

Most of the time, your debit cards and bank account activity won’t reflect on your credit score either. This information usually isn’t reported to the credit bureaus unless you repeatedly tap into your overdraft. So, it won’t help you get good credit score without credit history.

What’s the difference between credit score and credit history?

Your credit history is like your financial CV – and it’s different from your credit score, which is simply a number.

If you’re looking for help building your credit history, you’ll need to understand the differences between your credit history and credit score.

It may help to think of your credit history as a complete list of all the credit payments you've made for the past couple of years. 

Your credit score is like the mark you get for performing well on an exam. 

Tips for building US credit even faster

Just having credit and being responsible with it usually leads to good credit, but there are a few tips you don’t want to ignore to make your score the best it can be.

For a start, take a moment to set up automatic bill pay or recurring automatic payments whenever you can. The number one thing that negatively impacts your credit score is late or missing payments according to Experian’s director of consumer education

Plus, you can build credit by paying off outstanding debt on time and in full

Want to set up automatic payments for your Prodigy Finance loan?

Automatic payments are currently available for customers paying USD loans from US bank accounts.

Important tips to build your credit:

TIP: Never use one credit product to pay off another credit product, unless you are consolidating your debt or opting for credit with more favourable interest rate and other terms to settle your old debt. 

Who tracks your credit history in the US?

In the United States, there are three major credit bureaus:

  • Equifax
  • Experian
  • TransUnion

Even if one or more of these agencies operate in your home country, your financial history and credit-building activities won’t reflect on your US credit report.

These bureaus operate under national regulations in every territory they work in and different countries work with different scales for scoring and require different reporting metrics.

In the US, credit bureaus are regulated by the national Fair Credit Reporting Act, but they’re not operated by the government; each one is an independent, for-profit business.

While some creditors (including loan providers, credit card companies and even your cell phone contract) report to all three major US credit bureaus, others report to just one – or none at all.

Prodigy Finance reports payments made by US residents to Experian and UK residents to TransUnion.

Creditors aren’t required by law to report to the agencies, though most do – especially if you have a poor track record and frequently make late payments or skip them altogether.

Why you should care about credit reporting as an international student?

If you’re actively working to build a positive credit profile in the US, you want all your credit and contract payments to reflect on the reports compiled by one of the major agencies (and preferably all three).

Check with every provider who they’re reporting to and, if you have a choice, you may want to go with the provider that routinely or frequently submits reports.

Your credit history will show:

  • How much credit you have available.
  • How much credit you’re using.
  • How long you’ve had each reporting account.
  • How many new creditors you’ve approached recently.
  • Your payment history (including skipped payments, late payments and how late you made those payments).

Check your US credit score regularly

All three of the major US credit bureaus provide a free annual report (according to law) so you can check your own credit score.

When you apply for your own credit report, it’s a soft inquiry, so your score won’t be lowered for doing so.

More importantly, it gives you a chance to look for errors in your reports. Misreporting can affect the credit you qualify for and the interest rates attached to it. Regular reviews help you make sure everything is accurate.

If you do find discrepancies, you’ll also find that your creditors are happy to correct them if you can prove the reported information is inaccurate, because they’re required to correct mistakes in compliance with the Fair Credit Reporting Act.


Ready to build your credit in the US as an international grad?

Prodigy Finance offers refinancing on international student loans for grads living and working in the US - whatever visa they're on. 


Disclaimer: This blog is merely informative, is not directed at any particular reader and does not constitute financial or credit related advice. Readers are encouraged to do their own research on financial and credit products and on the institutions offering these products, and to consult a financial advisor before applying for and taking up credit. 


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