Establishing Credit History in the USA

Establishing Credit History in the USA

In the U.S., every person’s credit history is linked to their social security number. Credit history reveals your patterns of taking loans or credit, paying them on time, how many times you made a late payment, and whether you defaulted on a loan.

If you have bad credit history or no credit history, not only may you not be able to get a loan, you may have problems getting an apartment, phone, job, credit cards, electricity, etc. Bad marks in your credit history usually last seven years. 

Establishing credit history is like the chicken and egg problem. Lenders give money to people with good credit history and established credit. However, if no one gives you credit, how can you establish credit history? 

Some places may not give you a credit card of any kind unless you have been in the U.S. for at least six months. 

You may get credit card offers in the mail. That does not necessarily mean you are automatically approved. You still have to pass their eligibility criteria, and you can be denied.

Creditworthiness must be determined based on criteria related to your ability and willingness to repay debt. You can’t be discriminated against based on your sex, race, religion, marital status, national origin, age, or dependence on income from public assistance. 

If you are denied credit, the creditor must provide a written explanation of the reason or give directions to receive one free credit report for each denial, as long as you get it within 60 days of the denial.

Don’t apply for too many credit cards at once. Whenever there is an inquiry to the credit bureau about your credit history, your credit report will reflect it. These entries are either considered “hard” or “soft.” “Hard” entries are those you initiated when you applied for credit. “Soft” entries are those that creditors initiated trying to market credit to you. If there are too many “hard” entries in your credit history, it will definitely affect your credit score and will bring it down further.

Bank Accounts

Open at least a checking account and possibly a savings account. If you don’t have a bank account and if you have no credit history, you have literally no credibility to lenders. After you open a bank account, don’t overdraw your account or let any checks bounce. 

Even though bank accounts are really not part of your credit history, lenders can look at them to see how well you manage your money.

In Your Name

Get an apartment, telephone service, and other utilities in your name. Make sure to pay the bills on time.

If you move, make sure to disconnect all the utilities that were in your name.

Employment and Residence History

When you have no credit history, lenders have to look at other factors, such as your employment history and residence history. If you have a good job with steady pay, you’re better off than if you have changed jobs often in the recent past. If you had any periods of unemployment, it can negatively impact your ability to get credit.

If you have lived in the same place for a good amount of time, your chances of getting credit are much higher than if you moved around a lot. If you just arrived in the U.S., or if your consulting job requires you to move around the country, you may not have much choice regarding this.

Store Cards

You can approach a local gas station to see if they will give you a gas card. You can also try applying at local stores like Target, Sears, JC Penny, Macy’s, Kohl’s, etc. These types of cards are relatively easier to get. Once you have some of these cards (don’t get too many), pay off the balance completely every month.

Before getting one of these cards, find out whether or not they report to a credit bureau. Otherwise, there is no point in getting such credit if you’re trying to establish credit history. 

Once you have established good credit history and have proper credit cards, cancel all the store cards. They typically have high interest rates and most can be used only at the issuing store.

Secured Cards

After you have built a bit of credit history with store cards, you can try applying at your bank. If they refuse to give you a credit card, you can request a secured credit card. With a secured card, you’ll only receive a credit line equal to the amount of money you’ve deposited in the bank. Therefore, if you don’t pay it back, the bank has already collected the money from you in advance, thus they don’t run the risk of defaulted payments. 

Again, make sure that the secured card issuer reports to credit bureaus. 

There may be an application fee and/or processing fee.

Amex, DCU

You can also try Digital Federal Credit Union (DCU) for a credit card. Apparently, so many Indians get credit cards from DCU that some people jokingly call it Desi Credit Union.

You can also try applying for a credit card from American Express. With their classic card, you have to pay off the entire balance every month and there is no revolving credit, so it is relatively easy to be approved. Once the initial application is verified, they may ask for an employment letter verifying your salary. 


If you have managed to get a loan (such as a car loan) based on documents like your employment letter, salary slips, etc., you will build good credit history much faster if you make payments on time. Some people take loans (even if not financially required) just to build credit history. Newcomers may find it strange, but it is sometimes really required and very important.


If possible, you can have someone who already has good credit history in the U.S. be your cosigner. You must be very careful to make timely payments. If you don’t make a payment, the cosigner will have the financial burden of making it. If neither of you pay, both credit histories will be tarnished. When you make a credit application, make sure that the application is in both of your names, not just in the name of other party. Otherwise, you will never build credit history.


If you are a student and have little or no income, you may not qualify for credit cards. However, many credit card companies advertise at college campuses. Most of these credit cards have a very low credit limit. However, these cards are issued with the knowledge that students have little or no credit history. Make sure to mention in the application that you are a full-time student. Once you receive one of these cards and build your credit history, you can get other regular credit cards.

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