Moving to a new country comes with a steep learning curve—new customs, new systems, and often, entirely new concepts. For many international students in the U.S., understanding credit scores can be one of the most perplexing yet vital aspects of adapting to financial life. Imagine trying to rent an apartment, apply for a credit card, or even secure a job, only to discover that your credit score plays a decisive role. If this is unfamiliar territory, don’t worry—you’re not alone. In my home country, the concept of a credit score was completely foreign to me, but I quickly learned its importance. If you’re new to the U.S., understanding credit scores is a crucial first step toward financial independence.
What is a Credit Score?
A credit score is a three-digit number that reflects your creditworthiness, or how likely you are to repay borrowed money. Credit scores range from 300 to 850, with higher scores indicating better credit. Lenders, landlords, and even some employers use your credit score to gauge your financial reliability.
The most commonly used credit score in the U.S. is the FICO Score, but another common scoring model is the VantageScore. While they have slight differences, both systems use similar factors to determine your score.
There are five key factors that influence your credit score:
1. Payment History (35%)
Late payments, defaults, or accounts in collections can hurt your score significantly.
2. Amounts Owed (30%)
Ideally, you should aim to use less than 30% of your available credit across all accounts. Personally, I find it helpful to keep my utilization between 10-20%.
3. Length of Credit History (15%)
The longer you’ve had credit, the better. A longer credit history generally boosts your score.
4. New Credit (10%)
Opening too many new accounts in a short period can hurt your score. Each time you apply for credit, a hard inquiry is made on your credit report, which can temporarily lower your score.
Why Does Your Credit Score Matter?
Your credit score has a major impact on many aspects of your financial life. Here’s why maintaining a good score is important:
- Access to Loans and Credit: Lenders use your credit score to decide whether to approve you for loans (like car loans or mortgages) and credit cards. The higher your score, the more likely you are to be approved.
- Interest Rates and Terms: Your credit score also affects the interest rates you’ll be offered. With a high score, you’ll qualify for lower interest rates, meaning you’ll pay less over time for any borrowed money.
- Renting an Apartment: Many landlords check your credit score as part of the rental application process. A poor score can limit your housing options, while a good score makes you a more attractive tenant.
How to Build and Maintain a Good Credit Score
Whether you’re starting from scratch or trying to improve your existing score, here are some tips to build and maintain good credit:
- Pay Your Bills On Time;
- Keep Credit Utilization Low;
- Keep Old Accounts Open;
- Monitor Your Credit Report:
A helpful tip: Call your credit card customer service every six months or so to request an increase in your credit limit.
Understanding how credit scores work is essential for navigating financial life in the U.S., especially for international students. A strong credit score unlocks opportunities for better housing, lower loan interest rates, and greater financial security. Without it, you may face unnecessary barriers in your new environment. Take the time to learn and apply these principles early on. Building and maintaining good credit isn’t just about financial success; it’s about creating stability in a place where everything else may feel uncertain. As international students, mastering this system can help lay the foundation for a thriving life in the U.S.