Banking, Finance & Insurance in the U.S.
How to Build Credit & Manage Your Finances
It’s essential that you are well-prepared financially as you relocate to the U.S. There are some key factors to consider when arranging your finances for your move so that you can access your money, get credit for large purchases (such as a mortgage) and protect your future with insurance.
In this page, we’ll cover the basics of your personal financing that you will need to cover as you relocate.
America is a credit-oriented society, and it’s difficult to rent many houses and apartments or make larger purchases without credit. Unfortunately, in most cases, your credit in your country of origin will not be taken into account when you immigrate to the U.S. so you will have to build your credit from scratch.
The good news is this can be done quickly and using a variety of means if you plan well. The first thing you will need is your social security number.
Social Security Number
You must ensure you have your social security number as this number is used for all government records on your earnings and the years you have worked in America. Without this number, you are severely limited in terms of finances and your ability to open a bank account or file your taxes.
In many cases, you can now apply for your Social Security Number as you make your visa application via the Social Security Department. If you need to apply once you are in the U.S. you can obtain one by visiting a local social security office. You will need to provide information such as your immigration documents, passport, birth certificate, and driving license.
Starting to Build Your Credit
There are three main bureaus that will run checks on your credit history and come up with a score. These bureaus are Experian, Equifax, and TransUnion. Your credit file will show your credit score, up to a maximum of 900. When you first begin it will say it has insufficient data/credit history. Because of this, most credit options will be denied to you. Once you start to build your credit you should aim for a score of 650 or above.
Your credit score is also referred to as your FICO.
To begin building your credit you need to get a bank account and apply for one or two small pieces of credit (such as a store card). You might be able to obtain your credit file from the country you already reside in if you have one with companies like Equifax or Experian. This can help you to argue your case when starting to build your credit in the U.S.
If you already have any cards with major credit companies that have a presence in America such as Capital One or American Express you can also ask them if you can transfer your account to the American division.
Whichever path you choose, you will need a bank account. There are more details about banks accounts in the next section.
Once you have got a bank account you need to begin building your credit by using a Visa or MasterCard to make small purchases. To begin with, you might be offered a small credit limit or even a “secured card”. This is a card that is secured against a limit you deposit with the bank. It’s for people with no credit history (or bad credit history) so that the bank can use the deposit for payment if they miss making their payment.
Once you have a credit limit, try never to exceed 50% of it as this might red flag you as becoming in danger of being “overextended”. Pay off the amount on the card on time, in full, every month. This will start building your credit. Don’t apply for more than one or two cards or credit at a time. This can damage your chances of building your score. Keep it simple and be diligent about paying off your full balance regularly and on time.
Another way you might be able to start building credit is by contacting companies such as Mission Asset Fund, who run lending circles to help people build credit. Or, you can in some cases get car finance or other credit agreements with little to no credit history, however, you will have to pay much higher interest rates and put down a larger cash deposit. If you choose this route, ensure you get a deal that has no pre-payment penalties. This will ensure you can either pay it off quickly or re-finance once you have built some credit history.
As discussed above, you can in some cases choose the option of keeping your bank account in the country you are from and open an American account as well if they operate internationally. If this is not an option for you then you need to open a new American bank account.
Banks in America are often locally operated at state or regional level. It’s best to avoid local banks to begin with if you plan to travel a lot as you will be unable to cash cheques (checks) easily out of state and other banks will charge you to use their ATMs.
There are a number of larger national banks in America. The top national banks include –
Many of these banks offer incentives and bonuses to open accounts with them. Shop around to see which one will suit your needs best.
Your first account will probably be a checking account which is similar to a current account in the UK. A debit card is referred to as a “check card” but often cannot be used to guarantee check payments because of a high incidence of check fraud.
To open an account you will need your passport, immigration information, your social security number and proof of address. If you are still waiting for your social security number another form of ID might be accepted such as a passport number or alien identification card number.
As you start to use your account and build your credit remember to regularly check your credit file and ensure you are building a good history.
Getting a mortgage can be challenging as an expat because of the issues described above with credit and credit history. In addition, guidelines introduced in 2013 now make lending requirements much more stringent. Lenders now have to demand more documentation from potential borrowers and many of them will not consider lending to expats.
This doesn’t mean you should be disheartened! It is possible to secure a mortgage, but you may need to be persistent and shop around. On the plus side, interest rates remain relatively low and there are lots of mortgage products available. Mortgage rates will vary from state to state so it’s important to research the rates in the state you intend to relocate to.
To get a mortgage you will need to prove that you have sufficient income and funds to repay. The more cash you have available for a down payment, the better deal you are likely to get. You will need to show 3 years of tax returns (either U.S. tax returns or returns from your country of origin) and show your last two months of bank statements. Lenders may ask for an international credit report.
Most mortgage lenders will not be willing to lend you more than a debt-to-income ratio of 35%. You can check your current debt-to-income ratio using online tools from major American banks.
As an immigrant, you may have to make a bigger down payment because the LTV (loan-to-value ratio) is often set at around 60-70%. You can take out a mortgage for a maximum term of 30 years. There is no maximum age limit for getting a mortgage but your individual circumstances will be taken into account when you apply.
When it comes to education and getting the right people for your project there is some key difference between Europe and America. On the whole, education in Europe means there are a huge number of skilled workers, many of whom are happy to move between countries within the EU. Therefore, you can draw your pool of talent from multiple different countries.
This comes with its own challenges as language and cultural barriers within Europe can make it difficult for people from different countries to work together unless their language skills are excellent. In some cases, countries in Europe might think more insularly and within their own country rather than Europe or worldwide. The nature of EU being made up of so many counties and unique cultures can also make the business market feel fragmented.
In the U.S. on the other hand, while access to higher education is not as evenly distributed as it is in Europe, businesses have traditionally strong relationships with higher education institutions. The universities in America tend to be geared towards economic outcomes rather than being Ivory Towers. There is a huge range of science parks, technology offices and venture funds dedicated to business – and they invest in new ventures. Stanford University, for example, gained $200 million in Google stock when it went public, and almost half of the start-ups in Silicon Valley have their roots in the university.
This culture is not just limited to Silicon Valley, though. A huge range of American higher education institutions offer programs in entrepreneurship. Mobile millennial graduates are more willing than ever to put their talents and education into startup culture – giving you a large pool of young, talented and hungry graduates to help grow your business.
Starting a business in the U.S. can be both exhilarating and exasperating. There is much to know and even more to learn, and the pace of the information coming at you can be overwhelming.
That’s where Mount Bonnell Advisors come in.
Would you like to live your very own American Dream? At Mount Bonnell, we can guide you through the labyrinth of regulation and red tape and out into the blue skies of a dream come true – the dream of living and working in America.
Whether it’s technical issues around tax or residency, or strategic ones involving business formation and growth, the experienced team at Mount Bonnell Advisors are here to help.
So make that dream a reality by booking a consultation today with Mount Bonnell Advisors. Let the adventure commence!