Finance and Credit for U.S. Immigrants: Everything You Need to Know

It’s no secret to anyone how difficult it is to immigrate to a new country. Put a few things in a suitcase, leave friends and family behind and bet everything on the American Dream. However, in addition to all the immigration paperwork and the day-to-day stress of living in a new country, you also have to deal with building your finances from scratch.

When you start to analyze it, you might be overwhelmed by a completely different vocabulary than what you are used to—credit score and credit history, for example. In addition, you could face payments that you never knew about in your country of origin, such as rent, payday loans, and other financial tools.

Although this all may seem like a rapidly growing snowball heading your way, Debt.com created this guide to clear up your financial concerns and help you make your journey as an immigrant to the United States a smooth one.

A budget: Your best friend in the U.S.

Depending on how you arrived in the U.S., you may have a lot or a little money at the beginning. But no matter how much money you have in your pocket, you need to set a budget. So, even if you didn’t budget in your country of origin, you need to build a budget now.

A budget will tell you what your financial limits are and help you easily plan for your future.

Learn more about budgeting »

There are many apps that can help you like Tiller, but you can also go with the old trusty tools like pencil and paper.

Whether you generate income as soon as you arrive in the country or live off your savings at the beginning, it is important to know exactly how much money you have so that you can distribute it correctly.

When listing your expenses, it's important not to forget that as an immigrant, you may have to pay more than just rent, gas, food, and household services. Don't forget to put in your budget how much you'll need to pay for things like:

• Your immigration lawyer
• Migratory processes
• Document translation services
• Costs for new documents such as obtaining a driver's license

Even if your list of expenses seems long, don't forget to make room for savings. Now more than ever you need to prepare for any eventuality. You don’t want to get caught in a new country with unexpected expenses, especially if you don’t have a support system with family or friends here to help you.

Don’t feel like you need to start with a large sum of money. Setting aside $50 a month could be the start of a savings fund that saves you from debt in the future.

Credit: Your financial visa in the U.S.

Credit is one of the biggest mysteries that the average immigrant faces.

What is credit? How is it calculated? How can I improve it? What is a credit report? What does “running your credit” mean and why am I being told it affects my score?

The answers to these questions can have a major impact on your financial life as a U.S. immigrant. So, it’s important to learn about the U.S. credit system and master it as quickly as possible.

Here is a list to get you started:

Credit

Credit is the ability to borrow money or access goods or services from creditors (lenders, merchants or service providers) with the understanding that you’ll pay it back at a later date.

Credit score

According to the Federal Trade Commission (FTC), "it is a number that represents a rating of your level of probability of repaying a loan and of your punctuality in paying it." This is calculated using information from your credit report which contains:

• Credit history
• Credit utilization
• Credit age
• New credit applications
• Types of credit you have

The most popular credit scores, FICO and VantageScore, range from 300 to 850, the higher the score the better.

Learn more about credit scores »

Credit bureau

A credit bureau—also known as a credit reporting agency—is a company that collects information from lenders and creditors about your credit use. Then they sell this information to credit card companies, lenders, banks credit unions, and others like landlords and employers who want to check your credit. The top three credit bureaus in the U.S. are Equifax, Experian, and TransUnion.

Learn more about credit bureaus »

Credit report

A credit report is a profile created by a credit bureau that provides a snapshot of your history as a credit user. It provides details about your accounts, payment history, and public financial records, such as debt collection accounts, evictions, and bankruptcy. The information contained in your credit report is then used by companies like FICO to calculate your credit score.

Learn more about credit reports »

The Fair Credit Reporting Act (FCRA) exists to protect every consumer's right to a fair and accurate credit report. It gives you the right to check your credit report for free at annualcreditreport.com.

Building credit

When it comes time to work on raising your credit score, consider the five factors that affect it the most:

• Credit history (35%) – this looks at your payment history and the status of your accounts
• Credit utilization (30%) – this evaluates how much of your available credit limits that you’re using
• Credit age (15%) – this looks at the length of time you’ve had your accounts
• New credit applications (15%) – this factor depends on how many times you’ve applied for credit recently
• Credit mix (10%) – this looks at the types of accounts that you have

Raising your credit score can be a slow process. If you responsibly manage your finances, you can see that number grow steadily. Here are some basic options to increase your score:

• Get a secured credit card, which is designed for people with low or no credit score.
• Use a credit builder loan, which helps you build savings while you build your credit history.
• Become an authorized user of a credit card

Learn more about building credit »

Identity Theft: Scams are just around the corner

Although the United States is a country with many advancements and benefits, it is not safe from unscrupulous people who seek to "earn" a living by scamming others. Identity theft is one of the most popular crimes in the nation and every day, the personal data of thousands of victims falls into the hands of scammers.

Therefore, we advise you to keep your financial alerts on and protect your personal documents at all costs. Your Social Security card, passport, visa, and other documents with sensitive information should be kept in a secure place.

Also, avoid giving out this type of information on unsecured websites, over the phone or by replying ro emails or text messages.

Here's what to do if you think you've been a victim of identity theft or believe your personal information has been exposed:

• File a report with the Federal Trade Commission (FTC)
• Place a fraud alert with the credit bureaus
• Contact your financial institution and follow their instructions

Learn more about identity theft and how to protect your data »

How to avoid credit fraud

If you want to take precautions to protect your credit, you can use a tool called a credit freeze.

A credit freeze restricts all access to your credit report, meaning that you or anyone else won't be able to open a new credit account while the freeze is active. If a scammer, for example, were to obtain your personal information and tried to apply for a card in your name, they would be unable to because your credit is "frozen."

To freeze your credit, you need to contact the three credit bureaus and request a credit freeze. Each of the companies has its own procedures. The freeze will last until you decide to remove it.

Taxes: No one escapes the IRS

Upon arriving in the U.S., you surely heard the saying: "The only sure things in life are death and taxes.”

The Internal Revenue Service (IRS) oversees the collection of all taxes from those who live and work in the U.S., and you, as an immigrant, also fall into this group.

Regardless of your profession, at Debt.com we recommend that the first few years you file your taxes, you consult with a tax professional. Why? Because in addition to avoiding problems with the IRS for "skipping some income", you could lose the opportunity to use some deductions that will favor your wallet.

When is tax season?

In 2022, the tax filing season began on January 24 and will end on April 18. However, you can request a tax extension until October 18, 2022.

Where can I find a tax specialist?

The easiest way is to ask for referrals from friends or family members who have already been through this process. However, there are many ways to find free tax advice.

The person you hire to do your taxes should be a Certified Public Accountant (CPA), a tax attorney or an IRS Enrolled Agent.

What should I do if I owe the IRS money?

Owing money is not a pretty thing, but when it comes to owing the IRS things can get very ugly quickly. The IRS can garnish your wages, empty your bank accounts, and place liens and penalties on your property. They can do all that without the need for a court order.

If you have a debt with the IRS, we advise you not to ignore the situation. Consult an expert and explore the tax debt relief tools that exist to not spoil your future in the U.S...

At Debt.com we have a comprehensive guide that can help you before, during and after you file your taxes.

Learn more about filing your taxes »

Credit Card Debt: A silent enemy that can bankrupt you

A credit card may be one of the first financial tools you get when you arrive in the U.S., but you shouldn’t think of it as free money.

The average interest rate on a credit card is currently between 16-17%. That is high compared to rates on loans, so using credit cards can really cost you.

The average credit card balance is currently at $6,913, meaning Americans owe over $490 billion to credit card companies.

That's why Debt.com is here to help.

5 tips to avoid credit card debt:

1. Pay the balance due month by month
2. Only spend what you know you can afford
3. Avoid applying for multiple credit cards in a short period of time
4. Don't accept every credit card offer that comes in the mail
5. Negotiate the interest rate with your financial institution each year.

If you already have credit card debt and want to address it to prevent it from growing, Debt.com can help. We can connect you with a range of solutions that can get you out of debt in as little as 24-48 months with payments that fit your budget.