How to Get a Credit Card as a DACA: As a DACA participant, one way to invest in yourself is to build credit. A long and solid credit history opens several avenues, including:
- Higher education is available. Your credit history may assist you in obtaining student loans.
- Ownership of a home. A credit score is required to obtain a mortgage.
- Possibilities for employment If you’re looking for a career in finance or one that needs a security clearance, potential employers may do a credit check on you.
Building your credit may be empowering in addition to assisting you in achieving financial freedom. It may even have an impact on your mental health. Although individual experiences differ, some DACA participants begin their young adult lives with no financial supervision and may be unaware that credit cards and personal loans are available to them. Here’s what you need to know about credit building if you’re a DACA applicant.
Terms to know as you start building credit
Before you begin your credit-building adventure, you need understand how credit works and how it is feasible for you as a DACA applicant. To begin, here are a few basic phrases to memorize.
A credit score is a number produced by the three credit bureaus – TransUnion, Equifax, and Experian – that indicates your likelihood of meeting your credit payment commitments. It is used by lenders to assess whether or not to approve you for a credit card, loan, or mortgage. A higher credit score is evident when you build credit properly.
Number of Social Security
DACA participants can apply for a Social Security number (SSN) and work permission. According to US Citizenship and Immigration Services, you may apply for both using the same application, USCIS Form I-765 (USCIS). You can use your SSN on credit card applications if you’ve been authorized for one.
If you or a family member are unable to obtain an SSN for whatever reason, filing for an individual taxpayer identification number (ITIN) is your next best alternative. Some institutions will also accept an ITIN when applying for a credit card.
Spend some time learning about credit unions since they provide goods and services that may be a suitable fit for you. Credit unions are non-profit organizations that are owned by its members. In contrast to banks that operate to earn profit for shareholders, they return any profits made to their members.
Credit unions are noted for their specialized service and generally serve specific regions. Hispanic-owned bank unions, for example, may accept alternate forms of identification, such as a passport or Matricula Consular, a Mexican government identity card granted to people residing outside of the nation. The Juntos Avanzamos credit unions cater to the Hispanic and immigrant communities and allow alternative forms of identification.
As a DACA beneficiary, here’s how to get credit and build it.
There are various ways to develop credit, so take your time and think about which one is best for you. Here are the top credit-building options for DACA recipients to consider.
Loans for credit improvement
These loans, as the name implies, are meant to assist an individual in building their credit history. You borrow money from a bank or credit union with a credit-builder loan, but you don’t get it right away. Instead, you make monthly payments until the debt is paid off. At that time, you have complete access to the funds. Some credit-builder loans accrue interest, which means your money may have grown in value by the time you get access to them.
Credit-builder loans encourage you to save and make on-time payments. Because your lender reports your payments to the three major credit agencies in the United States, these loans help you improve credit. These loans are not available at all financial institutions, and they are more typically available in community banks or credit unions, like Juntos Avanzamos credit unions. These loans are a credit-building option for DACA participants because they do not require a credit history or a high credit score.
As a DACA participant, you may be the first in your family to obtain a credit card and navigate the financial system in the United States. If you want to use a credit card to establish your credit history, you should look at cards designed for those with little or no credit, such as student and secured credit cards.
Student credit cards are designed for college students who wish to establish credit and get incentives. Typically, rewards are geared to this group and their hobbies, such as discounts on dining out or streaming services.
To qualify, you must be enrolled in a two-year or four-year college or university program, however some student cards do not require a credit history. Discover student cards, for example, such as the Discover it® Student Cash Back or the Discover it® Student Chrome, provide significant rewards while requiring no credit history. Another option for earning rewards is the Deserve® EDU Mastercard, which is open to persons with no credit history and no SSN.
Secured credit cards, which are designed at persons with little to no credit, are a choice for people who aren’t students. You pay a predetermined amount as a deposit for a secured card, and the amount you may spend with your card in any given month is limited (usually matching the deposit amount). You may increase your credit over time by practicing healthy spending and paying habits.
There are several alternatives available when it comes to selecting a secured card, and some even give incentives with no annual charge. Bank of America® Customized Cash Rewards Secured, for example, gives 3% cash back in an area of your choice, such as petrol or travel, and 2% cash back on groceries and wholesale clubs on up to $2,500 in expenditure every quarter. It also provides 1% cash back on all other purchases. Another alternative is the Capital One Platinum Secured Credit Card, which does not give points but does offer $200 in credit for a $49.00 deposit.
Most credit card companies allow customers to change a secured card to an unsecured card if their credit score improves. This enables you to receive your money returned. You can also get a bigger spending limit and extra prizes.
Secured credit cards are available from the majority of banks and credit unions, including Juntos Avanzamos credit unions.
Becoming an authorized user
When you become an authorized user, you are added to someone else’s credit card account and given your own card to use. Card usage by you and your principal cardholder is recorded in your credit history. You’re on your way to getting your own credit card with prudent spending and payments from both parties. If you don’t want to have your own credit card and know and trust someone who is willing to add you to their account, this is a possibility. If you’re considering this technique, be sure you trust the primary cardholder and that they have a history of prudent credit card usage, or else their credit problems will become yours.
If you don’t want to commit to a credit card or a credit-builder loan, you still have other alternatives. Alternative credit-monitoring programs such as Experian Boost, Experian Go, UltraFICO, and eCredable Lift take an alternative approach to credit score development. Experian Boost, for example, adds services you currently pay for, such as utilities and streaming services, to your credit report in order to improve your credit score.
Experian Go does not require an existing credit score to utilize the service. Experian Boost, Experian Go, and UltraFICO are all free services, however eCredable Lift is not.
DACA recipients should follow these credit-building strategies.
When you acquire a credit-builder loan, apply for a credit card, or sign up for a credit monitoring program, you must keep track of your credit score. Here are a few pointers to bear in mind as you embark on your financial path.
Make timely payments
On-time payments are critical for maintaining and boosting your credit score, regardless of the sort of credit you use. Keep track of your payments by registering in automated payments or setting up reminders to pay your bills on time. This can help you prevent late fines and credit score drops. Paying your credit card amount in full on time will also help you avoid interest costs.
Examine your credit report
You may check your credit report at AnnualCreditReport.com, which provides a free credit report from each bureau once every 12 months. You can keep track of your credit-building efforts by checking your credit score. You’ll also have a better knowledge of what lenders and credit card companies look at when they perform credit checks on you for loan or credit card approvals. It is critical to check your credit report on a regular basis in order to maintain a good awareness of your credit score.
When you first start developing credit, don’t go overboard. If possible, limit yourself to one sort of credit, such as a loan or credit card, rather than spreading yourself too thin with many lines of credit. This allows you to keep better track of your payments and concentrate on establishing and keeping a solid credit score. When you are confident with your credit score, you might consider growing your credit utilization.
Keep an eye on your credit usage ratio.
Your credit usage ratio indicates how much of your available credit you are utilizing. In other words, it considers how much debt you have in relation to the amount of credit you have accessible. For instance, if your credit usage is 20%, that indicates you’re utilizing 20% of your available credit.
This figure has an impact on your credit score, so keep an eye on it. If you simply have one credit card and no other debt, divide your card’s outstanding balance by your overall credit limit to determine the ratio. Using $100 of a $1,000 credit limit results in a credit usage ratio of 10%. It is recommended that you keep your credit usage below 30%.
Even though you grew up in the United States, if you have DACA, you may have encountered many of the same challenges as new immigrants. Living in the United States without citizenship or the ability to qualify for government scholarships or loans may be frustrating. That’s why it’s critical to take whatever precautions you can to secure your financial future, including improving your credit. To begin developing your credit history, you can take out a credit-builder loan, apply for a student or secured credit card, or sign up for a credit monitoring program. Developing credit to improve your financial situation may provide you with the option to continue building the life you want in the United States.