A Social Security Number is required for all non-citizens working in the U.S., and having one makes it easier to apply for bank accounts, loans, and government services. Meanwhile, many new immigrants learn they can’t easily rent an apartment or obtain loans due to their lack of U.S. credit history. Luckily, these two critical components of your U.S. financial life go hand in hand, and can be established fairly quickly.
Social Security Number
A Social Security Number, or SSN, is a unique 9-digit number assigned to U.S. citizens at birth. Non-citizens authorized by the Department of Homeland Security (DHS) to work in the United States are also required to have one. The number is used to report your wages to the government, and determine your eligibility for Social Security, a national insurance program offering retirement, survivor, and disability benefits. SSNs also serve as de facto national identifiers, and are requested by a wide range of businesses, including banks or creditors.
It’s free to apply for a Social Security Number, and you can do so before or after your move:
Apply in your home country, at the same time as you file an application for your immigrant visa with the U.S. Department of State. Your Social Security Card will be mailed to you within 3 weeks of your arrival in the U.S. See details on applying here.
Or, apply after you arrive in the U.S., in person at your local Social Security Office: You can find a list of offices in each state here. It’s recommended you wait at least 10 days after you arrive in the U.S. — this makes it easier for the DHS to verify your documents, and will speed processing. A list of documents you’ll need to bring to apply can be found here.
Once you have your SSN, you’re ready to tackle another common obstacle for newcomers: establishing credit.
It’s wise to obtain your credit history from your bank or credit agency before you leave your home country. Unfortunately, the credit you’ve built in your home country may not transfer to the U.S., and you’ll likely need to build credit from scratch once you arrive. Luckily, it doesn’t take long—the main type of credit score used in the U.S. is a FICO score, and you can get one after you’ve had an account open and active for six months.
Your credit score is a rating of how trustworthy you are to potential lenders. It’s determined by your credit history at one of the three major U.S. credit bureaus: TransUnion, Equifax, and Experian. Each maintains a record of your present and past accounts, how much you owe on each, and your track record of paying on time.
Credit scores range from 300 (the lowest) to 850 (the highest). A higher score means you’re a lower-risk borrower with a history of responsible credit use. People with higher credit scores are more likely to be approved for loans and receive lower interest rates. That means that an excellent score can save you real money over the life of a loan. Employers in some states may also use your credit report as part of employment decisions—although 16 cities and states, including California, New York City, and Chicago, have laws strictly limiting the collection and use of this information.
So, how can a newcomer build credit? Start small and aim for just one line of credit; your best bet is to apply for a secured credit card at your local bank or credit union. Since these cards are backed by funds in your bank account, they’re easy to get with little credit history.
You can also leverage an existing bank relationship: If you have an international credit card, call and see if they’ll convert it into a US credit card. Another option is to take out a small loan at your local bank. You’ll likely pay a high interest rate, but timely payments will build your credit history quickly.
Once you’ve opened an account, it’s important to use it wisely. The three most important factors in determining your credit score are your payment history, credit utilization ratio, and length of credit history. These three factors together account for 80% of your FICO score, so make sure you have them dialed in (Source).
Payment History: The most important factor in determining your credit score. It’s important to establish a spotless track record of on-time payments, since late payments and delinquent accounts ding your score. Setting up automatic payments can keep you effortlessly up-to-date with your bills.
Credit Utilization Ratio: This is the balance-to-limit ratio — or, the amount of total credit being used on any one account. Keeping this ratio below 30% will improve your credit score. For example, if you have a $1,000 limit on a credit card, carry less than a $300 balance. Using more than 30% credit on any one account can be a sign that you’re struggling financially. To maintain optimal utilization, you can pay down your balance, or ask your credit card company to raise your limit.
Length of Credit History: The longer your accounts are open, the higher your credit score will be.
Here’s a checklist to keep track of what to do and when to do when it comes to getting a Social Security Number and building an American credit score.