Why should Indian students learn to build credit history in the USA?

Rashi ...

Did you know that over 300k students travel to the USA every year from India? Only 20 percent of them return to India, the rest stay back to work for two years and a few would stay back to pursue their PhDs. 

Those who stay back are happy to get a job and pay back their education loans. However, what they don’t know is that they need credit history to participate in the US financial system, which essentially means that they cannot access goods, services, and real estate to enjoy life in that country. 

Surviving in the USA, without credit history, is difficult because you are considered a individual who is not credit worthy. This is because the banking system does not have any data that can show that you can repay the loan.

In this blog, Creditap will tell you how to build your credit history and secure yourself a life in the USA as many of you may want to move to that country for a longer period of time.

So, what is credit history?

graphs representing the credit history
graphs representing the credit history

Credit history is the ability to repay debts and display the commitment to repay them. These are transactions of the past that evaluate the responsibility for future repayment.

Why is this relevant to students going there. 

Data from 2022 also showed that India recorded the highest number of students going to the USA. The number of Indian students who were granted visas broke the record, of number of visas issued, which was so far held by Chinese students for two decades. All of you moving there need credit history from day one. And here is why it is important. 

From Student loan to creating credit history – an important transition

Akriti, is an aspiring software engineer, traveling to the USA to pursue Masters in Computer Software. She was accepted into a top college in the USA and her dream was to stay back in the USA for a few years to repay her loan. She had funded her education by mortgaging her father’s property. She diligently finished her Master’s and even secured a job and was confident she would repay the loan and lead good couple of years in the USA. However, she experienced nothing but difficulty for the next three months of graduating. 

When she went house hunting she realised that the house owner wanted to know her credit history. A similar situation arose when she bought furniture, a washing machine and went to the dealership to order a car. 

Every retailer came back to her and suggested that she speak to a lawyer who could help her create a credit history. 

She sat back and wondered if she could have created credit history, in hindsight, as soon as she had landed in the USA. 

Now she found herself shelling money to her company lawyer and was distraught with the fact that her life as a student, for two years, did not carry any credit history while using a credit card issued from her home country. She also began to understand what credit history is.

Almost 98 percent of the students do not understand the need for credit history. 

Financial institutions use credit history as one of the factors in deciding whether they have to lend money, how much should be the pay out, and at what interest rate. 

Utility companies can tally this when setting up an account to decide if a deposit is required. Employers might also check the credit score before making a hiring decision.

Most lenders consider a credit history of over two years a little more than a decent start, which means that by the time Akriti had stepped into corporate life she would be carrying a credit history in the US. A lack of credit history acts as a red flag in future borrowings. 

Akriti’s nightmare began after coming out of the joyful confines of University life as she could not buy anything on credit. She had to delve into her savings in India to spend in the USA. The spending from Indian funds did not create a credit history for the USA and it was not until her employer intervened on her behalf did she begin to start enjoying life in the USA. 

Ways to build credit history

We at Creditap can provide you with a card accredited by a bank in the USA and tie it to your credit required for housing, hospitality, travel, and shopping. Here are some tips to build credit 

different types of cards a student can opt for a credit 
different types of cards a student can opt for a credit 

* Secured credit card – it is a card with your deposited amount as a credit limit. This doesn’t initially provide credit but reports your transactional activity to build your credit history from nothing to as fast as possible. 

* Use a co-signer – to get a credit without any credit history, you can go for a co-signer, who acts as a guarantor to repay the amount. Make sure the co-signer has a good credit history.

* Establishing good relations with the bank – this can be achieved by opening multiple types of accounts with the same bank to show financial stability. 

* Considering a credit-builder – it is just like secured credit card, but here you deposit the amount every month, and you receive the loan with interest at the end. This is one of the healthy ways of building a credit history.

* Become an authorized user – you can be added as a user with an existing card holder with a credit history. This can be any of your family members. This helps in the faster building of individual credit history. 

* Get a store card – many retailers and stores provide a store card to make purchases. They also offer discounts on first purchases and bonuses with regular purchasing.

* Pay on time – to maintain a positive credit history it is a must to pay all your debts on or before time. This shows your responsibility towards the repayment.

Now that you have come this far, we assume you can really go after your dreams. So what’s stopping you from heading to Creditap’s website? Get in touch with us to know more.