Importance of positive credit history and good credit score for immigrants  

The other day I received a call from a client who sounded very worried. He told me that unbeknownst to him, his credit card showed an unpaid debt. The so-called debt was about a membership fee that he supposedly incurred when he applied for a wholesale grocery club. He did not know that he was charged and said he was not informed that the fee will be charged to his newly-opened card. He did not use that credit card for a year until he received a call from a credit collection agency. He was shocked to learn about it since he really did not know about such a debt. He was told that if he did not make arrangements to fully pay his debt, the credit collection agency will sue him in court and report him to credit rating agencies. He was very concerned and rightfully so.

A credit score is very important here in the US. Its importance cannot be underestimated. Almost everything in your life here in the US depends on how healthy your credit score is. Banks use it to approve credit card applications, home mortgage, and auto loans. Prospective employers conduct background checks and credit score is one of the screening methods. Renters make sure that you not only have the ability to pay but also the history of making timely and consistent payments.

Needless to say, you must guard your credit score with utmost vigilance and dedication to improve and make it higher. There are a ton of available resources on how to raise and maintain your score and how to avoid having it lowered. Instances that hurt your score include non-payment and untimely payment of debts, and having too many debts in comparison with your income and ability to pay.

So going back to my client’s dilemma, what he could do is call the bank first, make the payment or dispute it. After he works it out with the bank, he can call the credit card company and request that unpaid debt to be taken down in his credit history. He must do it as soon as he can and must have all the documents to disprove or dispute such a debt.

Immigrants, when still newly arrived in the US, do not necessarily think about credit score. More often than not, because of unfamiliarity with the US financial system, having a very good credit score is not their priority. Also, since they are also new in the US, they have not developed a reliable and consistent credit history.

What is ironic is that these new immigrants do not show a credit history because they have not built it over time and thus they have zero or very low credit score. However, their credit history and good score can only be developed and obtained when someone is willing to extend debt to them. But almost every lender such as a bank is hesitant or unwilling to them money because of poor credit score.

This dilemma will get resolved over time. There are several strategies to overcome this. A bank credit manager or financial advisor can help a new immigrant navigate this tricky situation. But the most important thing is once you have started building credit, make sure you guard it like your life depends on it.