What an H-1B visa holder needs to know about building US credit
H-1B visa holders face specific challenges for building good credit in the US, but there are also many opportunities. Learn about your options.
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 which can also have an impact on how you go about building credit history in the US. Because credit is such an important feature of American life, the details in this article will help you prepare for a successful financial future in the US.
Social Security Numbers and H-1B visas
Although H-1B visas are open to all qualified individuals, there are usually two groups of H-1B visa holders:
International recruits who have not previously held a visa with work privileges, and do not 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.
What is a Social Security Number (SSN)?
A Social Security Number is a 9-digit tax identification number that is used to report your income to the US government.
If you’re new to the US, apply for your SSN at the earliest. Keep in mind that your SSN doesn’t confer any right to work, but it does show the government you had that right at some point previously.
Having an SSN is another big part of American life as it often functions as an ID number (even though that’s not its explicit purpose) because it is unique to the individual holding it.
Once you have your SSN, everything from opening a bank account to buying a car becomes easier, though it is possible to 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 and opportunities for H-1B visa holders
Although you may be able to remain in the US for up to 6 years on an H-1B visa, at some point your passport will expire.
Because of this, most lenders won’t be able to provide the same credit opportunities that are available to US citizens.
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.
Here’s what you should know about building credit while on an H-1B visa:
Opening a US bank account as an H-1B visa holder
Challenge: You don’t have any credit history when you enter the country. Banks are often reluctant to lend money to non-permanent residents, especially when they are not customers.
Opportunity: 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. 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 the country on your H-1B visa.
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 the following documents:
Proof of identification
Proof of your visa
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.
Regional or local banks typically offer lower fee structures and often have a little more flexibility in terms of loans and credit products. But if you’re considering relocation to another state, you may want to consider a national bank.
Credit product limitations for H-1B visa holders
Challenge: Regardless of the length of time you’ve been developing your local financial history in the US, you’re not going to have the full range of credit products available to you that are available to citizens. Credit products you may have difficulty obtaining are mortgages and other long-term loans.
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.
Opportunities: 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 in the country.
Credit length limitations for H-1B visa holders
Challenge: Most US lenders and banks will be limited by the expiration date of your current visa. Because of this, you will find it difficult to receive approval for long-term credit opportunities that extend past this time frame.
Opoortunity: You may be eligible for short-term credit via in-store, secured and unsecured credit cards or through short-term auto and personal loans. More on these below.
Getting US credit cards as an H-1B visa holder
Challenge: If you’re totally new to the US, you’re not going to be offered a standard credit card straight away.
Opportunity: Because credit is so important in the US, you’ll want to explore obtaining a credit card in order to begin building a strong credit score. Here are a few options you may wish to investigate:
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 multiple stores).
Often easier to get than unsecured credit cards.
Typically low limits, which can be increased over time.
Secured credit card
Offered primarily 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 providers.
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.
How to get a credit card in the US
You can apply for a credit card on the bank’s website or in-person. You’ll want to check and improve your credit score and clear up any outstanding debts to improve your chances of approval. You’ll also want to evaluate the different types of credit cards and weigh the benefits before deciding on one.
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.
Accessing 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.
Obtaining personal loans on an H-1B visa
Can you get a personal loan on an H-1B visa? The short answer: yes. However, even if you are eligible for a personal loan, you will be limited to credit that you can repay by the time your current visa expires.
A personal loan can be useful for an emergency or a necessary purchase, but keep in mind they often carry higher interest rates than secured loans (such as a car loan). If you need a personal loan on a H-1B visa, make sure to shop around. A great place to begin is your local bank.
Lenders are often hesitant to provide long-term personal loans to H-1B visa holders who will not be in the country for very long. A personal loan for H-1B visa holders can be seen as ‘high risk’ for the lender. However, the fact that you have an H-1B visa shows that you are wanted in America, and with some research, you can find lenders (banks, online lenders, and credit unions, to name a few) who will see your comprehensive profile and offer you a loan.
If you are struggling to find a co-signer for your H-1B personal loan, your employer might be the perfect choice! Your employer is already sponsoring your work visa, and might be willing to take an extra step of helping you get a personal loan on your H-1B.
Advantages of a personal loan for H-1B visa holders
A personal loan is a great opportunity to establish and build credit
Managing finances can be difficult at first, considering that you will have a number of sizeable expenses during your initial days in the US. A personal loan can help you meet your costs and settle in comfortably.
H-1B visa holders can often get personal loans at lower rates of interest from American lenders as compared to their home countries. This can significantly boost savings in the long run.
Auto and home loan credit for H-1B visa holders
Challenge: Due to time restraints of your visa, you won’t be able to secure a typical home loan that lasts between 20 and 30 years. A long-term car loan for visa-holders may also be more difficult to obtain.
Opportunity: You could potentially secure a small home loan if you have almost the full purchase amount in cash. This, however, is an unlikely scenario for most H-1B visa holders, so you’ll probably need to rent your home during this time. On the plus side, renting your home is a great way to build your credit history.
Auto loans are easier to secure on an H-1B visa than an OPT extension of the F-1 visa. However, you still won’t have the full range of options available to American citizens or permanent residents, and the repayment terms for a car loan will need to fall within the time provided for by your visa. Also keep the following in mind:
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 will extend you an offer.
Next steps for H-1B visa holders
The H-1B visa is valid for up to a maximum of 6 years.
Many internationals who got their masters in the US have also used up the OPT extension on their F-1 visa. If this is the case, then it’s time to start considering 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.
No matter what your decision, building your credit while on an H-1B visa will make your financial life easier while in the US.
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