How to Build U.S. Credit with an ITIN: A Guide for Non-U.S. Residents

How to Build U.S. Credit with an ITIN: A Guide for Non-U.S. Residents

October 13, 2024
4 min read

Introduction

Establishing a strong credit score is essential for accessing loans, credit cards, and even better rental options in the U.S. For non-U.S. residents who don’t have a Social Security Number (SSN), this may seem challenging. However, using an Individual Taxpayer Identification Number (ITIN) allows non-U.S. residents to build U.S. credit successfully. In this guide, we’ll cover the steps you need to take to build your credit with an ITIN and why establishing credit is key for future financial opportunities.

What Is an ITIN and How Does It Help Build Credit?

An Individual Taxpayer Identification Number (ITIN) is issued by the IRS to individuals who aren’t eligible for an SSN, often non-U.S. residents, foreign nationals, or immigrants. Although the ITIN is primarily for tax purposes, many banks and financial institutions allow ITIN holders to access financial products such as secured credit cards and loans, which report to credit bureaus and help build your credit score.

Can You Build a U.S. Credit Score Without an SSN?

Yes! Non-U.S. residents can still build credit in the U.S. with an ITIN. Many banks and financial institutions recognize the ITIN as a valid identification number for credit products, which means you can start building credit with an ITIN even without an SSN. As you use these credit products responsibly, your credit activity will be reported to major credit bureaus like Experian, Equifax, and TransUnion, allowing you to build a U.S. credit score.

Steps to Build U.S. Credit with an ITIN

1. Apply for an ITIN (If You Don’t Have One)

The first step is to apply for an ITIN if you don’t already have one. To do this, complete IRS Form W-7 and submit it along with the required identification documents, like a passport. Once you have an ITIN, you’re eligible to apply for certain credit-building products.

2. Open a U.S. Bank Account

Opening a U.S. bank account, such as a checking or savings account, establishes your financial presence in the U.S. Many banks offer options for non-U.S. residents with ITINs, which allows you to manage your money and build a relationship with a U.S. bank. This can be useful when applying for credit products like a secured credit card.

3. Apply for a Secured Credit Card

A secured credit card is one of the best tools to build U.S. credit as a non-U.S. resident. Unlike traditional credit cards, secured cards require a cash deposit that serves as collateral and usually becomes your credit limit. Many secured credit cards are available to ITIN holders and report your credit activity to the credit bureaus, helping you establish a U.S. credit score.

How to Use a Secured Credit Card to Build Credit:

• Make small, manageable purchases each month.

• Pay off the balance in full and on time to avoid interest and build positive payment history.

• Keep your credit utilization low by using less than 30% of your credit limit.

Examples of banks offering secured credit cards to ITIN holders include Capital One, Bank of America, and Discover. As you demonstrate responsible use, many secured credit cards eventually upgrade to unsecured cards, which further boosts your credit profile.

4. Consider Credit-Builder Loans

Some financial institutions, particularly credit unions, offer credit-builder loans that can help establish credit. With a credit-builder loan, the lender holds the loan amount in a secured account while you make monthly payments. Once you’ve repaid the loan, you receive the funds, and the payment history is reported to the credit bureaus, building your credit score.

5. Use Credit Responsibly

Responsible credit use is essential when building credit with an ITIN. Here are some best practices:

• Pay on time: Late payments can significantly impact your credit score.

• Keep credit utilization low: Aim to use less than 30% of your available credit.

• Limit credit applications: Each new application triggers a hard inquiry, which can temporarily lower your score. Space out applications to avoid negative effects.

How to Track and Monitor Your ITIN Credit Score

Once you begin using credit, monitoring your credit score is important to track your progress. Non-U.S. residents with an ITIN can access their credit reports and scores through the major credit bureaus—Experian, Equifax, and TransUnion. You can also check your credit score with services like Credit Karma and AnnualCreditReport.com to monitor changes.

Common Mistakes to Avoid When Building Credit with ITIN

a) Missing Payments

Payment history is the most influential factor in your credit score. A missed payment can significantly damage your score, so always pay on time.

b) High Credit Utilization

Using too much of your available credit can hurt your score. Try to keep credit card balances low to maintain a healthy utilization ratio, ideally below 30%.

c) Applying for Too Many Credit Accounts

Applying for multiple credit accounts in a short period triggers hard inquiries, which can lower your score. Apply for credit only when necessary and space out applications to avoid too many inquiries.

How Long Does It Take to Build U.S. Credit with an ITIN?

Building U.S. credit with an ITIN is a gradual process. For most people, it takes about 6-12 months of responsible credit use to start seeing a positive impact on their credit score. To achieve a higher credit score and qualify for more extensive financial opportunities, it may take several years of consistent and responsible financial behavior.

FAQs About Building U.S. Credit with an ITIN

Q: Can I get a credit card with only an ITIN?
A: Yes, many financial institutions offer secured credit cards to ITIN holders, which can be used to start building credit.

Q: Will my credit activity with an ITIN be reported to credit bureaus?
A: Yes, most secured credit cards and credit-builder loans report activity to the major credit bureaus, which helps build your credit profile.

Q: Can I transition to a regular credit card later?
A: Many secured credit cards offer the opportunity to upgrade to unsecured credit after a period of responsible use, further helping to build your credit score.

Conclusion

For non-U.S. residents, building U.S. credit with an ITIN is entirely possible and beneficial for accessing better financial opportunities. By opening a U.S. bank account, using a secured credit card or credit-builder loan, and practicing responsible credit habits, you can steadily improve your ITIN credit score. With consistency and patience, your credit score will grow, setting the foundation for future financial success in the U.S.