An essential part of getting ahead economically in America is establishing credit. From buying a house or renting an apartment to leasing a car or even applying for a job, having no credit can make the process more difficult.

If you have recently immigrated to the United States, you will most likely be invisible to credit reporting agencies. In other words, you would have zero established credit in the country. And a good credit score can take time to establish, whether you are starting from zero or improving poor credit. Fortunately, there are a few programs designed to help jumpstart that process.

Credit Builder Loans

In order to start building healthy credit, you will need to take out a loan or line of credit and establish a history of successful payments to that account. This can feel like a catch-22 if you are rejected for the very credit cards or loans that would help you build credit history—because you don’t yet have credit history.

Credit Builder loans are designed to counteract that by allowing someone to take out a small loan that gets invested in a certificate of deposit (CD) and paid back over time to build credit. Instead of having immediate access to the loan amount, the funds are held in the CD until the loan is paid off. After all the payments are made, you will have the amount of the loan plus the interest those funds earned during the repayment period.

“A year of steady payments establishes a positive credit history that can help your score,” says Christine Walsh Rogers, product strategy leader for First Fed Bank. “The better your score, the more likely you will get better rates on your next loan.”

Keeping up with your payments on a credit builder loan is crucial because it shows you can handle a credit account. However, if you have to close out a credit builder loan early, your credit will not be negatively affected, and in most cases, it will have improved if any payments were made. The very design of the program is to create a low-risk way for people to build and improve their credit scores.

Compass Account provides a debit card for financial transactions. Photo courtesy of First Fed.

Compass Account with Debit Card

While having a bank account doesn’t improve your credit on its own, it gives you a safe way to save your money and make transactions. Banks offer their customers convenient ways to make purchases, pay bills, cash checks, transfer money, and access cash. Banks are also more inclined to help their account holders access credit through loan programs or credit cards.

However, another barrier to establishing a financial history can be the lack of U.S. identification like a driver’s license which is required to open a traditional bank account. People without a bank account often end up turning to expensive, predatory loan services because they are unable to access other financial services.

Some banks, like First Fed, have partnered with programs like Bank On Washington to increase access to financial services. These programs are designed specially to address needs of immigrants and refugees, youth, veterans, and families with disabilities.

First Fed’s Compass Account can be opened without a valid driver’s license, social security number, or permanent address, as long as you have a photo ID and verifiable mailing address such as an employer or social services agency. This makes it a great account type for those with non-U.S. identification including government-issued IDs from other countries, tribal membership cards, and education-based ID cards.

The Compass Account features direct deposit, online banking, and a VISA debit card for access to your bank account funds worldwide. To prevent any fees for insufficient funds, the account prevents overdraft by not authorizing withdrawals when they would exceed your balance. That way, you do not spend more than you have.

Building Your Financial Future

It’s never too early, or too late, to start building your credit. Creating financial stability with an established credit payment history increasing likelihood of future credit approvals and loans at better rates.

“Everyone deserves the chance to build or improve their credit and fully participate in the economy,” Walsh Rogers adds. “First Fed is glad to offer these banking solutions which create a strong foundation for future financial success.”

First Fed is a Member FDIC and Equal Housing Lender. Learn more at ourfirstfed.com

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