The full guide to managing your credit on an H-1B visa
Prodigy Finance - December 13, 2018
For many, the H-1B visa is the stepping stone between the OPT extension on the F-1 visa and Green Card status.
And, while that sounds simple enough, the H-1B visa is actually quite complex, with numerous exceptions and restrictions.
The H-1B visa is:
- A non-immigrant visa. In other words, a time limit is attached to the right to remain in the US. Initially, H-1B visa holders are given three years to work in the United States; however, extensions are available which allow for a total of six years.
- A dual-intention visa, which means that, although you’re on a temporary visa, you can express your desire to remain in the US permanently by applying for a Green Card during this visa period.
- A visa which confers working rights, although there are limitations imposed on both you and your employer.
- Dependent on your employment. If you lose your job and don’t secure another one or have a relevant, pending application for another visa class, you’ll need to leave the country.
- Given on a lottery basis to the applying company for a specific employee. Applications, which are done by the sponsoring company, must be submitted in April for work which can begin in the following September.
How to get an H-1B visa
There are a limited number of H-1B visas issued. The current cap is set at 65,000 new visas annually. In addition, another 20,000 visas are available for internationals who obtained their master’s degree in the United States from accredited institutions.
Both sets operate on a random lottery system, beginning with the visas reserved for those holding US master’s degrees. Anyone from this group who isn’t awarded an H-1B visa during this round of selection automatically flows into the second round.
To get an idea of selectivity, you should know that there were around 95,000 applicants within each pool on their own (before the first round of approvals).
However, there are typically more than 85,000 H-1B visas awarded annually. The reasons for this vary, but the two primary exceptions are:
- Institutions that are cap-exempt (such as universities) and;
- Roll-over spots from countries provided with a set number of H-1B visas that don’t reach their quota. (Those unfilled positions are added to the general pool for the following year.)
The H-1B visa basics
Who is eligible for an H-1B visa: Internationals holding at least a bachelor’s degree or its equivalent. In addition to a demonstration of expertise by the potential visa holder, the company must also show that no US citizen or permanent resident can perform the necessary functions of the position.
What can you do with an H-1B visa: You’ll have the right to work in the US on a non-immigrant visa. If you become unemployed (for any reason), you only have a limited time to secure a new position or visa before you need to leave the country.
How long is the H-1B valid: The initial period lasts for three years, though this can be extended for a maximum of six years. However, the USCIS has recently issued permits allowing for less time, a policy which companies are fighting.
When can you apply: Your company must apply on your behalf and do so in April, though work can only begin in September. It’s a complicated process, but one that your sponsor deals with, not you.
What you need to know about your Social Security Number and your H-1B visa
Although the H-1B visa is open to all qualified individuals, it’s fair to say that there are two groups of H-1B visa holders:
- Those who recruited internationally and have not previously held a visa with work privileges, meaning they don’t have a Social Security Number (SSN).
- Graduates who previously held an F-1 visa, and, typically, also the OPT visa (allowing the right to work). In most cases, these H-1B visa holders already have an SSN.
If you’re new to the US, you’ll need to apply for your SSN which the tax identification number used to report your income to the government. Keep in mind that your SSN doesn’t give you any right to work - though it does show the government that you had that right at some point previously.
Having an SSN is a big part of American life as it often functions as an ID number (even though that’s not its explicit purpose) as it’s unique to the individual holding it.
Once you have your SSN, everything from opening a bank account to buying a car becomes easier though you can do these without an SSN. But, an SSN alone doesn’t open your credit and financing options. Your visa class and credit history in the US play a much bigger role.
H-1B visas in the news
Recently, the number and benefits of the H-1B visa programme have been a topic for public discussion in the US. There are both supporters and detractors.
As it’s a process to get an H-1B visa for an international employee, most companies reserve their applications only for qualified individuals and skilled positions.
While there have been cases of abuse of the system, it’s unclear whether they are widespread. This speculation has led to investigations which may or may not lead to increasing restrictions on the H-1B visa programme.
Any substantial changes to its structures, numbers or policies remains under the control of the US congress, though the findings of other branches of government can play a role.
Credit challenges for H-1B visa holders
CHALLENGE: Although you may be able to remain in the US for up to six years on an H-1B visa, you’ll still face a number of challenges related to credit; all of them go back to the expiration date in your passport.
In most cases, and with most lenders, you won’t be able to get credit where the repayment terms extend past the date provided by your H-1B visa - which means you’re usually limited to credit products with repayment terms under three years.
BENEFIT: That’s not to say, of course, that you can’t get credit and start building your credit profile, only that you won’t have the full spread available.
Building and securing credit on H-1B visa
CHALLENGE: Regardless of the length of time you’ve been in the US - and had the chance to develop your local financial history in the country - you’re not going to have the full range of credit products available to you.
But, you’ll still want to aggressively build your credit profile if you have any intention of pursuing an immigrant visa (such as a Green Card) in the future. To say that credit is central to the American way of life is almost an understatement.
BENEFIT: There are a number of ways to do this, many of which will make your life easier while you’re in the US, even if you don’t plan on remaining.
Can I refinance my student loan on an H-1B visa
You can not only refinance your international student loan on an H-1B visa, but you should do so - and the sooner you do it, the better.
Refinancing your student loan will save several thousands of dollars off its total cost - and provide other benefits at the same time.
Refinancing allows you to take advantage of the positive changes you’ve made since accepting your student loan - namely getting your degree and securing a job.
Basically, banks and other loan providers are happy to reward you for achieving what you set out to do.
The benefits of refinancing your international student loan:
- Save thousands by getting a lower rate.
- Have more control over loan terms (duration and monthly repayment amounts, for example).
- Build your local credit profile rapidly.
Quick view: Prodigy Finance: refinance benefits
- Get rates starting from 4% + LIBOR
- Get your commitment-free quote in 10 minutes
- Application has no impact to your credit score
- Choose the loan terms that suit your budget
- Build your credit history
That said, you will need to look at loan refinancing providers like Prodigy Finance unless you’re in a position to pay off the new loan before your H-1B visa expires.
US bank accounts for H-1B visa holders
If you don’t already have a bank account in the United States, this will definitely be one of the first things you handle when you enter on your H-1B visa.
In addition to depositing your salary and handling the bills, a US bank account is essentially the first step to developing your US credit profile.
Maintaining an account in good standing gives your bank reason to trust you when you’re looking for credit in the future (it’s not the only thing they will consider, but it certainly helps).
To open a US bank account, you’ll need:
- Proof of identification
- Proof of your visa
- Proof of address
- Your SSN
- Funds to deposit
- Some banks may also request proof of employment
Each bank has its own set of criteria for opening accounts - and they have their own terms for both checking and savings accounts. Take time to find a bank account with terms that best reflect how you’ll use the account.
TIP: In the US, you’ll find that some banks operate regionally while others are nationwide.
If you’re considering relocation to another state, you may want to consider one of the banks that operate nationally.
On the other hand, regional and local banks typically offer lower fee structures and often have a little more flexibility in terms of loans and credit products.
US credit cards for H-1B visa holders
If you’re totally new to the US, you’re not going to be offered a standard credit card straight away.
That doesn’t mean, however, that you don’t have any options. And, because credit is so important, you’ll want to explore your credit card options so you can build a strong credit score.
In-store cards
- Offered by large retailers such as Kohl’s and Target.
- Can be used for in-store purchases (though some allow for use in several stores).
- Often easier to get than unsecured credit cards.
- Typically low limits which can be increased over time.
Secured credit card
- Typically offered by national banks and credit providers.
- Can be used anywhere.
- Easier to get than unsecured credit cards.
- Limited to the amount of funds set aside in a deposit account.
Unsecured credit card
- Offered by a wide range of regional and national provides.
- Can be used anywhere.
- Typically requires some credit history to obtain.
- The better your credit score, the more likely you are to have a higher limit and a lower interest rate
TIP: Having a good credit score and history is the key to obtaining financing for big ticket items in the future. Scores range between 300 and 850 in the US, and you’ll want to strive for a score over 700.
Access your credit reports is relatively easy and you’re entitled to a free credit report annually. If you have any questions about how to access your credit report, inquire with your bank.
Can I get credit for cars or houses on an H-1B visa?
CHALLENGE: Although you won’t be able to secure a typical home loan lasting between 20 and 30 years because of the length of time allocated by your visa, you could potentially secure a small loan if you have almost the full purchase amount in cash.
This isn’t a likely scenario for most H-1B visa holders, you’ll probably need to rent your home during this time.
BENEFIT: On the plus side, renting your home is a great way to build your credit history.
Car loans are definitely easier to secure on an H-1B visa than with the OPT extension on an F-1 visa, but you still won’t have the full range of options available to American citizens or permanent residents.
The repayment terms for a car loan will need to fall within the time provided for by your visa.
- If you have an established credit history in the US, applying sooner gives you more time to repay your loan.
- If you’re new to the country, you may need to wait for an approved three-year extension before an auto loan provider extends you an offer.
Are there personal loan options for H-1B visa holders?
Yes, but once again, you’re usually limited to products that you can repay by the time your current visa expires.
While you may find a personal loan useful for an emergency, keep in mind that they often carry higher interest rates than secured loans (such as a car loan). This is definitely an area where you’ll want to shop around for options if you need a personal loan on a H-1B visa.
What’s the next step for H-1B visa holders?
The H-1B visa is valid for a maximum of six years.
And, many internationals who got their masters in the US have also used up the OPT extension on their F-1 visa which means it’s time to start considering your long-term options.
While there are many possibilities, you’ll first need to determine whether your goals include returning to your home country or not. If not, it’s time to start thinking about obtaining a Green Card - and, depending on how long you’ve lived in the US, whether citizenship is the route you plan to take.
Want to learn more about refinancing your student loan on an H-1B visa?
Prodigy Finance offers no cosigner, collateral-free refinancing to eligible international graduates living and working in the United States. If you want to reduce the total cost of your student loan while building your local credit, you'll want to consider refinancing your loans with Prodigy Finance now.
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