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If you’re living in the United States, you need to build and maintain a good credit score. Your credit score is something that lenders, landlords, and even employers will review to assess your financial stability.  

Learn more on the Lendbuzz blog: What is a Credit Score and Why Should You Care?

Let’s take a look at five things that can make a big difference not only in your credit score, and therefore affect whether you will be seen as a responsible consumer who can manage their money – and their debts!

Use no more than 30% of your credit card limit(s)

Take a look at your most recent credit card statement. There will be an entry on it marked “Credit Limit.” This is the maximum amount that the card issuer will allow you to charge on your card. But to be a truly responsible credit card user, you should not charge more than 30% of that number. And the lower the better.

Why? This is called your “credit utilization” rate. It suggests how responsible you are with your money. If you max out your card, and then make minimum monthly payments, there is no room for an emergency expense, like a big medical bill or a major car repair. This demonstrates irresponsible, risky money management, and it is very bad for your credit score.

The best solution is to charge no more than you can afford to pay off every month. A zero balance is a beautiful thing, especially for your credit score!

Pay your bills at least 3 days in advance

We all know what a due date is, when it comes to bills. It’s the date by which your payment must reach the issuer of that bill. It is NOT the date on which you should be sending it out!

It takes time for a bill payment to reach a creditor, whether you put it into a mailbox or use an online bill-paying method. And it is very important that your payments arrive on time. Late credit card payments can cost you money in late fees and extra interest charges. They can also hurt your credit score, by showing your credit utilization as higher than it would be if you paid on time. And if you are skating close to your credit limit, a late payment could put you over it, which is a bad thing in many different ways!

It’s hard to predict how long each bill will take to be processed, from the time you send it. To be completely safe, try paying a week ahead. That should be plenty of time for your payments to arrive early and without any penalties, to your wallet or your credit score!

Getting an auto loan can build your credit

If you are trying to build up your credit score and you need a car, getting an auto loan is a great way to do it. Once you have received the loan and have made several payments on it, this will fortify your credit history, giving you a record of making a significant payment over a prolonged period of time. This is great for your credit score.

Be sure that you will be able to make all of the monthly payments that the loan requires. Under no circumstances do you want to make late payments, or default and have the car repossessed. That would be very bad…

While your application for the loan will add a hard inquiry to your credit report, this will be more than made up for by your positive payment history during the term of the loan. So go for it!

Lendbuzz specializes in car loans for visa holders with little or no credit history. You can apply and get a rate in minutes.

Maintain a healthy level of debts to assets

When a lender is making a decision on whether to give you a credit card or a car loan, they will make a few calculations that will tell them how well you will be able to make the monthly payments. A key formula that they use is called the debt-to assets ratio.

The debt-to assets ratio is calculated by starting with an inventory of all of your long-term debt. This includes:

  • Mortgage or rent payments
  • Credit card payments
  • Car payments
  • Student loan payments
  • Other monthly bills

Next comes a calculation of your total assets. This category would include things like:

  • Gross monthly income
  • Stocks, bonds, and other assets (if you have any)

Then you simply divide your total monthly debt by your total monthly assets. If you have $2,000 of debt and $5,000 of assets each month, then your debt-to assets ratio is 0.4. Generally speaking, the lower your ratio the better, especially if you are planning to apply for a loan. Most lenders prefer to approve loans to consumers with ratios of .35 to .45.

Know the difference between a soft and hard query

A query, also known as an inquiry or a pull, is the term for when your credit is checked by a potential creditor. There are two varieties: soft and hard.

A soft query usually happens without your knowledge. These are done by the companies who mail you credit card or loan offers. A soft query is done simply to pre-qualify you for the offer. A prospective employer may also do a soft query to make sure that you are a financially responsible person. A soft query will not affect your credit score.

A hard query, on the other hand, should not happen without your consent. It is usually made as a consequence of your applying for some type of credit. While a hard query will become part of your credit report and may temporarily knock a few points off your score, multiple inquiries around the same time (usually from shopping rates among several lenders) will not be counted as additional queries. This is not a problem if you have very good credit, but those with marginal credit scores should minimize the amount of hard queries they cause.

how to get a car loan without credit history united states

New to the US? No credit history? No Problem!

You’re an international who moved to the United States for work or study. The time has now come, you need to buy a car. Deciding to purchase a vehicle is an exciting time for anyone. Whether it’s for a new job, a new home, or a simpler commute, the freedom of having a personal vehicle is a milestone worth celebrating. However, the task may seem daunting when you consider a few things. A car loan is a wise decision for an expat. It may be a necessary step in order to afford a vehicle. The problem is, as an international, you have not had the chance to build your credit history in the U.S. yet. Now, you may be asking yourself… How can I get a car loan without credit history?

Don’t worry! It’s possible. Here’s a breakdown of everything you need to know about getting a car loan in the United States without any credit history.

What is credit and why don’t internationals have it?

Credit is the comprehensive history of all of your financial transactions. By using your Social Security Number, credit bureaus in the United States compile reports using data from lenders, banks, and credit card companies, to name a few.

Credit bureaus issue a Credit Score for anyone with consumer history and a social security number. If you have a credit score, it can range from 350 to 850, with 850 being the highest. Lenders use this score to determine whether or not they want to loan money to you. As well as to determine interest rates based on how good your credit score is.

Most Americans have some sort of credit history by the time they reach adulthood. They have bank accounts opened by family members, shared credit cards with parents, and even student debt that contributes to credit scores.

But if you’re an international who has recently come to the U.S., and haven’t engaged with this kind of consumer behavior yet. You probably don’t have a credit history on the books. Additionally, you may not have a Social Security Number.

What’s the problem with not having credit?

Having no credit isn’t as bad as having bad credit, but it can still make establishing a permanent life in the U.S. challenging. And to make matters more complicated, your credit history does not follow you from your home country.

This makes for one giant challenge for internationals in the US. Most applications for loans, credit cards, mortgages, and apartments require a credit check. Even some employers rely on credit checks to determine a candidate’s reliability in high stakes jobs.

If you are new to the United States, or even just haven’t engaged in consumer behaviors that get reported to credit bureaus, it’s very likely that you do not have a credit score. In the event that you need to borrow money, for example, for a car loan, it can be very challenging to find a lender who understands your unique situation.

why dont internationals have credit score score in the united states how to get car loan without credit history

How can I get a car loan without credit history?

Whether you’re purchasing a vehicle from a dealer or used from a private seller, often times you’ll need a car loan to make the purchase happen. Sometimes, dealers even use a special car loan rate as a selling tactic. They might offer a low-interest rate special offer, just for you.

If you’re an international without credit history, unfortunately, this offer is probably not for you. Car loans offered by dealerships and banks typically require a social security number, and a minimum credit score to qualify.

So where does this leave you? Is it possible to get a car loan without credit history?

It is. Credit has become the “go-to” tool to evaluate a consumer’s trustworthiness. However, there are other factors that can paint a similar, if not clearer, picture of your financial reliability.

International students and professionals don’t have credit history in the United States yet. They need a lender that will look beyond credit scores to provide them fair car loan rates.

Lendbuzz works to assist international students and professionals with this very challenge. Credit bureaus only use transactional history to give you a score. Therefore, potential lenders only see your transactions. If you don’t have a history of responsibly paying back your debts, or having been lent money before, lenders can consider you a high-risk borrower.

Lendbuzz is different from typical lenders because they look at the whole picture of your financial situation. Your past, present, and future. Lendbuzz considers other factors such as your education, savings, employment and earning potential in the future. That way Lendbuzz is able to determine your financial reliability. Thanks to that, Lendbuzz can offer competitive rates without ever looking at credit scores.

For example, an applicant who has a Master’s degree, a full-time job, and $50,000 in savings could be considered more financially reliable than someone who has no degree, works part-time, and has $500 in savings. This broader understanding of your financial potential helps Lendbuzz make decisions on who gets approved for a loan. Also, at what interest rates money can be borrowed.

How does a car loan from Lendbuzz help build my credit?

Just because Lendbuzz can provide you with a car loan without credit history, that doesn’t mean the benefits stop there.

If you are approved for a car loan with Lendbuzz, then you are already taking the first steps towards building your credit in the U.S. Just like any other lender, Lendbuzz links your loan and payments to your social security number. Then, Lendbuzz reports it to the three major credit reporting bureaus.

Each on-time payment you make with Lendbuzz helps you build good credit. You are demonstrating good financial responsibility with a U.S. based lender. This can be a valuable stepping stone. It can help you in the future. You may want to buy a  home with the help of a mortgage, sign an apartment lease on your own, or apply for a credit card.

Your credit score is determined based on money that has been lent to you. Either in the form of a loan or in available funds to spend (like a credit card) or how well you pay your bills on time. If you form good habits with your car loan early on, you will likely have success with your credit in the future.

 

Not having a credit score just because you’re an expat should never hold you back from getting the car that you need. When you work with a lender like Lendbuzz to finance your vehicle, you can hit the road knowing that you’re already paving the way toward a strong credit future.

If you would like to learn more about how to build credit in the US, download the Lendbuzz Credit Building Guide for internationals.