Building a US credit file from nothing

Your credit history doesn’t come with you.

Credit files are national. A US credit bureau holds what US lenders report about people with a US number, a Social Security number or an ITIN issued for a US tax reason, and it can’t see the files kept in your home country. A long, clean history abroad stays where it is.

A few lenders look at foreign credit reports for some applicants, but that is the exception, and it rarely extends to cards. For almost everyone, the first US application is read against an empty or very thin file, which is why a founder’s route to US banking and credit starts the file early, and a private client’s does too.

A file starts with the first account that reports.

A US credit file exists once a lender reports an account in your name to a bureau. Until then there is nothing to score, however much money you hold in a US bank. Deposit accounts generally don’t report, so a funded checking account helps a bank get to know you but doesn’t start a file by itself.

The first reporting account is usually a card, often a modest one, from a bank that already holds your money. From that month on, every on-time payment and every statement balance adds a line to your history. A card secured by a deposit is a common way to begin.

More than one bureau keeps a file, and they don’t always match.

Three national credit bureaus, Equifax, Experian and TransUnion, each keep their own file on you. Lenders choose which bureaus they report to and which they read, so the three files can differ. An account may appear on one and not another, or show a different balance.

An issuer often reads one bureau for an application, and which one can depend on the product and where you apply. A thin file at that bureau can lead to a no even when another shows more history. That is why we look at all three before planning applications.

A young file grows with a few habits, and a few things set it back.

A file grows with time and with evidence that you handle credit well. In the first year, a few habits do most of the work.

Paying every statement in full and on time
Keeping balances low against each card’s limit
Keeping your first accounts open as they age
Using each card a little every month
A name and address that stay the same everywhere

Some things set a young file back further than they would an established one, because there is so little else in it to balance them.

Several applications within a few months
A late payment, even a single one
Closing your oldest account early
Balances close to the limit when the statement closes

Nobody can promise a score.

A score is calculated by the bureaus and read by each lender in its own way, so nobody outside them controls the number. Treat anyone who names the score you will reach with care.

The first year is the slow part.

In the first months there is little to see. The file exists, it shows one or two accounts and a short record of payments, and most issuers still treat it as thin. It can feel as though nothing is happening.

This is when the history that later decisions rest on is being written. After a year or so of on-time payments across a few accounts, the file reads very differently, and applications that were too early become reasonable. Plan your first card application and the ones after it around that pace.

Check your file before every application.

Before each application, look at your file at all three bureaus. Check that your name, address and tax number appear as you gave them, that every account is yours and that no payment is marked late by mistake. Errors are common in young files, especially when a name is written differently on different documents.

A correction can take weeks, so find the error before an issuer does. Asking for your own report doesn’t count against you.