December 7, 2022

Can undocumented immigrants apply for a credit card?

After arriving in the United States, an undocumented immigrant has to deal with so many things that are foreign to him. Among them: the US financial system, which can be difficult to navigate even for those born in the US.

Getting a credit card can be one item on an undocumented immigrant’s financial to-do list. Undocumented immigrants can apply for a credit card in the United States, but they may have to jump through some hurdles to do so. These could include obtaining a federal tax identification number or obtaining a secured credit card.

“Many people we talk to in the immigrant community struggle to access credit because they haven’t had access to financial education about their rights in the financial system,” says immigration attorney Adina Appelbaum. , Certified Financial Advisor and Co-Founder of Immigrant Finance.

Immigrants tend to rely on expensive alternative financial services, such as check cashing companies, payday lenders and pawnbrokers, at great expense. Meanwhile, the services of traditional banks tend to be much more affordable. An undocumented immigrant’s financial education should focus on high-cost alternative financial services, says Magnus Larsson, co-founder and CEO of Majority (a digital bank for migrants).

Do you need a social security number to get a credit card?

No federal law prohibits an undocumented immigrant from getting a credit card in the United States, Applebaum says.

Based on their business practices, some credit card issuers require an applicant to provide a social security number. However, many credit card issuers accept a individual tax identification number as an alternative to the social security number. The nine-digit ITIN, while similar to the nine-digit SSN, is issued for tax purposes and does not entitle you to work in the United States or receive the benefits of the SSN.

Even with an ITIN, an applicant may not be approved for a credit card if they have no credit history. Not having a credit history is not inherently bad, it only means that you have never used credit-building financial products, such as a credit card or loan, in the United States.

If a Social Security number or ITIN is not an option, some credit card issuers may accept the applicant’s foreign passport or US driver’s license. Yet another alternative is Nova Credit Credit Passportthat an issuer can use to look up an applicant’s foreign credit history.

Credit card issuers that do not require an SSN

Credit card issuers that do not require an SSN include:

  • American Express
  • Bank of America
  • Capital one
  • Hunt
  • Town

How an undocumented immigrant can apply for a credit card

Contrary to popular belief, there are many other ways for an undocumented immigrant with no recorded credit history in the United States to obtain a credit card.

Get a secure credit card

Unlike an unsecured credit card, a secured credit card usually requires a cash deposit which acts as collateral. The guarantee protects the card issuer by guaranteeing repayment of any debt you may accumulate on the card. The credit limit for one of these cards is usually 50% or 100% of the deposit amount.

The purpose of a secured credit card is to help someone establish their credit history and then transition to a traditional unsecured credit card. Most, but not all, secured credit cards report a cardholder’s payment history to the credit bureaus, which slowly helps your credit score go up. If this information is not reported, your credit score will not increase, so be sure to apply for a secure card that regularly reports your payment activity.

Ask someone to be a co-signer

Another way to get a credit card is to find a co-signer. As part of this arrangement, someone else (often a relative) agrees to cover card payments or the entire balance if the primary cardholder is unable to do so. Keep in mind, however, that many major credit card issuers don’t allow co-signers.

Become an authorized user

You can also request to be added as an authorized user on someone else’s credit card. As an authorized user, you get your own card connected to the primary cardholder’s line of credit. This allows you to use the card to spend and enjoy all the benefits of the card.

The account holder is financially responsible for the monthly card payments and the entire card balance, although you can of course make arrangements with the primary card holder to pay them your balance each month. The person whose card account you join is usually a spouse or relative, but a friend is also possible, provided they are trustworthy and financially responsible.

If you or the primary account holder make payments on time each month, it will positively reflect on both of your credit reports, as payment history is regularly reported to the credit bureaus. This could be very advantageous for both parties. Some credit issuers do not report authorized user activity, so make sure your issuer does before you become a user.

Request a joint account

Another option is to apply for a joint credit card account with someone else, such as a spouse or family member, which makes you both the primary cardholder and responsible for covering the balance. The main attraction – maybe with your two incomes, the issuer will feel more confident to extend credit to you.

As with an Authorized User, each joint account holder’s payment activity is generally reported to the credit bureaus. So, if payments are made on time and regularly, you could see your credit history get stronger. However, note that many card issuers no longer offer joint credit accounts.

Get a credit card with no credit history

Some card issuers might be willing to approve an undocumented immigrant for a traditional unsecured credit card even if they have no credit history. It should be noted, however, that cards with no credit history may have drawbacks such as a higher than normal interest rate or a lower than normal credit limit. Still, if you’re careful not to overcharge your card and pay your bills on time each month, these cards work just as well for building up your credit.

Applebaum says that in many other countries credit is less commonly used than in places like the United States. Therefore, an undocumented immigrant may arrive in the United States with no credit history.

“For immigrants who have a credit history in their home country, many are unable to transfer their credit history once they arrive in the United States, so they have to start from scratch,” she says. “In addition, people who have no immigration status or who have uncertain and temporary types of status or who are in between statuses may have difficulty opening credit cards and not knowing if they are eligible to have them in the first place.”

How to Build Credit as an Undocumented Immigrant

“Learning to manage a credit card responsibly and pay it off in full each month over time is one of the best ways to build a solid credit score through payment history and length of credit. credit history,” says Applebaum.

Payment history makes up 35% of your FICO credit score, the most widely used scoring model, while length of credit history makes up 15%. Here are some other tips you could try to build your credit:

  • Open a bank account in the United States Some credit card issuers may require an applicant to have a US bank account.
  • Pay all your bills, such as rent and utility bills, on time each month. Not only will you get used to paying your bills regularly, but you can also include these payments in your credit report through Experian Boost.
  • Maintain a low overall amount of debt. The amount of debt you carry relative to your total credit limit, also known as the credit utilization rate, is 30% of your FICO credit score. “Don’t get caught in the spiral of expensive credit,” advises Larsson.
  • Consider transferring your credit history from your home country to the United States Larsson says credit card issuers “need to go beyond the existing credit score system” to account for disadvantaged consumers like undocumented immigrants.
  • Avoid applying for too many credit cards at once. Those with credit ratings would experience several tough demands, which would lower your rating by a few points. When it comes to people with no credit, you still shouldn’t apply for too many cards at once – lenders will think you have financial problems and pose greater credit risk.
  • Avoid payday loans. The APR for a payday loan can be 400% or more, which is much higher than the typical APR for a credit card or personal loan. Larsson calls payday loans an “evil” form of credit that preys on undocumented immigrants.

The bottom line

Navigating the US financial system as an immigrant, including the process of obtaining a credit card, can be daunting. “The system is not designed for people who weren’t born and raised here financially,” Larsson says.

Fortunately, credit cards are available to undocumented immigrants, although they can be difficult to obtain. And, there “are no shortcuts,” says Larsson.

You don’t necessarily need a social security number to qualify for a credit card. In addition, several credit options are available for undocumented migrants who wish to obtain a credit card. These include a secured credit card, which requires a cash deposit, or a credit card designed for someone with no credit history. By working through the application process and being responsible for credit, an undocumented immigrant can reach over 80% of adults in the United States who have credit cards.