Updated: Aug 11
You might have heard about how important it is for people here to have a good credit score. But as a dependent on H4 Visa without an SSN, it is extremely difficult to first build any credit history and have a decent enough credit score.
In this Guide we will tell you how you can build your own credit as a dependent on H4 Visa in the US even without an SSN.
But before we do that, let’s familiarize ourselves with some terms and terminologies.
What is a Credit Score?
If you haven’t heard of the term “credit score,” it’s one that you will want to become familiar with during your time here in the US. A credit score is a rating given to your financial background when assessed by a lender. When you’re applying to borrow money (like through a loan or credit card) the lender will most likely look at your credit score to see whether you are an eligible candidate. Your credit score basically sums up how much of a financial risk you would be if you were to be loaned money.
Here we’ll share with you what it means to build credit, why you should build credit as a dependent and how you can start building your credit as a dependent in the US.
Credit Building Explained
A FICO score is used to predict how reliable of a borrower you will be in terms of paying back the borrowed funds. However, typically if an individual does not have credit history that is at least six months old, they will not have a FICO score. Additionally, different lenders will request your credit score from different sources depending on the system they use and whether they’ve adapted to the new FICO system or use another company such as Vantage Score.
5 Key Factors that Affect your Credit
When trying to build your credit there are five key factors you need to know about that can impact your score (usually your FICO score, which most lenders refer to). These five factors are:
Payment History (35%)
Amount Owed (30%)
Credit History Length (15%)
New Credit (10%)
Types of Credit in Use (10%)
Having understood all of the above, now let’s move on to how you can start building you Credit as a dependent.
The biggest roadblock that most dependents (esp. H4 dependents) face is the lack of SSN. SSN is important because it is required to apply for a Credit Card and a credit card is one of the most important if not the only tool to build your credit history.
Since, H4 dependents aren’t eligible for an SSN (L2 dependents can apply for SSN), the best option (replacement) is to have an ITIN – Tax Identification number. An ITIN is another nine-digit identifier that functions similarly to a Social Security number.
However, it should be noted that there are some banks that will let you open a bank account as well give you a credit card without SSN. Bank of America is one such bank.
Transferring your Credit History from Back home:
For those who had a credit history back home, they can also get their credit history transferred here using services of a credit transfer company called Nova Credit.
Your credit score from back home will be tagged to your Passport and your ITIN until you get your SSN.
It is a great way from people with a credit history back home to get it transfer here instead of starting from scratch.
What's more, the service is free.
Getting an ITIN
To apply for an ITIN, fill out the application, which you can find on the IRS website.
Having an ITIN opens up multiple possibilities that will help you in building your Credit here.
Read through the various methods that dependents can start to build credit, The sooner you begin to build your credit while inside the US, the better.
You can open a bank account. While a lot of bank requires an SSN to open a Checking or Savings Bank Account, there are quite a lot of banks that will let you open an account with an ITIN and other documents that you may already have. There are a couple of ways that you can build credit by using a bank account. Try opening both a checking and a saving account.
Regularly transferring money to your savings account or keeping your savings account healthy can show that you are responsible with your finances and are thinking long-term.
Banks that let you open an account without SSN:
· Bank of America
· Alliant Credit Union
· PNC Bank
· Well Fargo
Apart from the above traditional banking institutions, these days there are number of Neo (Digital only) banks that are specifically catered to the needs of Immigrants and will let you open a bank account with them.
Like we said earlier, the easiest way to build credit is by owning a credit card and using it wisely. While we Indians are brought with the thought process of credit card not being good for us, out here it’s the exact opposite.
The biggest issue is that not many companies offer a credit card without SNN. But there are still plenty of good credit cards available to those with just an ITIN.
Examples of some Good Credit cards with SSN are:
Bank of America
Capital One Platinum Card
Petal 2 Visa Credit Card
Some of the above will let you apply for a credit card online itself while some may require you to visit a branch.
Secured Credit Cards:
It is similar to a debit card, but a credit card. What you do is that you give the bank $500 and get a secure card, so your credit limit is $500. You can start using your card and use it and pay it off completely by the month end. Never keep outstanding balances. After 6 months, you can ask for increase in credit limit. If you have paid your balances on time fully and maintained well, you should get an increase in credit limit. Slowly, after that you use your card and start building credit history.
Store credit cards are credit cards you’re able to use within that specific store. For example, Macy’s Credit Card, Kohl’s credit card and so on. They often offer you rewards such as discounts and early notifications on promotions. However, just like a credit card, the store will charge you if you don’t make the payments on time. Additionally, although they’re usually easily approved, store credit cards typically do not provide you with a credit limit as high as a traditional credit card - this means if you make minor purchases and don’t have a very high limit, your borrowed to available credit ratio could hurt your credit.
Start paying some of the utility bills with your Credit card. For example, gas, electric, internet, phone bills etc. If you’re not earning, chances are you might need some help from your spouse here. But that’s alright. After all, you both are a team and building credit is important for the both of you.
Set up monthly transfers from your bank towards these expenses to ensure they are always paid on time. Making regular payments on all your utilities is another way to prove to lenders that you are responsible with your payments and will be a suitable applicant for a loan or credit option. For each of your utility bills you can request proof of your payments over the last months or years, which many credit providers are beginning to accept as supporting evidence of your payment background for your application. Additionally, if you decide to relocate within the US keep in mind that your new utility company may request your utility payment history.
Grocery Shopping and Misc.:
start using your credit card wherever possible. Use it to buy groceries, at a restaurant or a café. A lot of credit card have great rewards too.
Just make sure you regularly make your Credit Card payments. Late fees will not only hurt your wallet, but it will also hurt your Credit Score.
Also, make sure that you pay the full amount and not just the minimum amount required at the end of the month. That amount accumulates and it becomes difficult to clear it eventually. That is exactly how most Americans are in debt.
It takes about six months of credit activity for a FICO credit score to be created. Once you have a FICO score — the score most commonly used by lenders to determine your creditworthiness — you may find a wider variety of credit cards available to you. You could move up to an unsecured credit card (one that doesn't require a deposit) and eventually cards that offer juicy rewards.