I'm new to the U.S. with no credit score. How do I build credit from zero?

The question

An illustrative letter.

The answer

My dear, welcome. Two years in a new country is a long stretch of learning, and you have clearly handled your money with care. Paying cash for everything is a good habit, not a bad one. The trouble is only that cash leaves no trail. A credit score is a record of how you have handled borrowed money, and here you have not borrowed yet, so there is nothing to score. That can be put right, and sooner than you might think.

Why don't I have a credit score here?

In the U.S., your credit report is kept by three national credit bureaus, which collect information from lenders about the accounts you hold and how you pay them. Your score is worked out from that report. Records from your home country usually stay there: the bureaus here generally cannot see them, so most newcomers start with no file at all.

Lenders call this being "credit invisible", and it says nothing about whether you can be trusted. It only says nobody here has watched you pay yet. In my years in lending, a thin file was the most ordinary thing in the world. Everyone starts with one. The aim now is to give the bureaus something steady to look at.

How can I rent while my score is still growing?

You do not have to wait for a score to find a home. Many landlords will look at the whole picture when you show it to them plainly:

• Proof of steady income. Recent pay stubs, a letter from your employer or bank statements showing regular deposits. Many landlords look for income of around three times the monthly rent.
• A larger deposit, or rent paid ahead. Some landlords accept an extra month's deposit or rent paid in advance in place of a score. What they may ask for depends on your state's rules.
• A guarantor. A relative or friend with good U.S. credit can agree to cover the rent if you cannot. Some companies offer this as a paid service.
• References. A letter from a past landlord, at home or here, and one from your employer.

Landlords who rent out a few homes themselves are often more willing to talk than large management companies with fixed rules. Before you pay any application fee, ask whether they accept applicants with no credit history, so you are not paying to be turned down.

What is the simplest way to start a credit record?

For most newcomers it is a secured credit card. You give the card company a deposit, often a few hundred dollars, and that deposit becomes your credit limit. Because your own money stands behind it, card companies will usually say yes to someone with no history. Ask your own bank first, then a local credit union.

How you use it matters more than how much. Put one small, regular bill on it, such as your phone plan, and pay the full balance every month, on time, from your checking account. Setting up an automatic payment for the full balance means you never forget. Keep the balance well under a third of your limit, since scores look at how much of your available credit you use. After six months to a year of this, many card companies review the account and may return your deposit and move you to a regular card.

Before you apply, ask one question: does this card report to all three national credit bureaus? A card that does not report builds nothing.

Is a credit-builder loan a better first step?

It is a good partner, or an alternative if you would rather not hold a card. With a credit-builder loan, often offered by credit unions and community banks, the lender puts a small sum, perhaps a few hundred to a thousand dollars, into a locked savings account. You repay it in monthly installments, and each payment is reported to the bureaus. At the end, the savings are released to you.

So you finish with a payment record and some savings. The cost is the interest and any fees along the way, so compare them before you sign. Holding both a card and an installment loan can help, because scoring models like to see that you can handle different kinds of credit. But one account, well managed, is enough to begin.

Are there other ways to add to my record?

Two more are worth knowing. If someone close to you has a long, clean credit history, they can add you as an authorized user on their card, and their account may then appear on your report too. Choose with care: if they miss a payment, that can show on your record as well.

Your rent can help as well. Some landlords, and some rent-reporting services, send on-time rent payments to the credit bureaus. Ask your landlord whether they do. If there is a charge, weigh it against what it adds.

How long until I have a score?

Under the most widely used scoring model, a score usually appears once an account has been open about six months and has reported recent activity. Some other models can score you sooner. Your first score may be modest, and that is normal. Each on-time month adds to it, and within a year or two of steady use, many people find their score is strong enough for an ordinary rental application, a better card or a car loan.

What can set me back?

• Applying for many cards at once. Each application can mean a hard inquiry on your report, and several close together can lower a new score.
• A missed payment. A payment 30 days late can stay on your report for years. Automatic payments protect you.
• Anyone selling a quick score. Nobody can buy you a credit history. Be wary of any company that promises one for a fee.

You can see your credit reports for free from each of the three bureaus at AnnualCreditReport.com, the official site. Look at them once your first account has been open a few months, to make sure your name, your address and your accounts appear correctly.

You built a careful life on cash. Now you are only teaching a new system to see the care you already take. One small account, paid on time, month after month: that is all it asks of you.

One thing to do this week

Ask your bank or a credit union for a secured card or credit-builder loan that reports to all three credit bureaus.