By Gregory Sweeney, Managing Partner – International Investors Mortgage LLC
Article originally published in the May 2021 IIUSA Regional Center Business Journal
Immigrants come to the United States to build a better life, enhance their career opportunities, and provide a better future for their families. In their transitional years they face many challenges, especially when they engage with U.S. banks and apply for a loan to purchase property.
Challenges Immigrants Face in Accessing Credit
One of the biggest challenges for new immigrants to the United States is their ability to access quality credit and financing opportunities across all credit facilities – from credit cards to personal, auto, or student loans, to mortgages. Financial institutions operating in the U.S. are subject to strict requirements from federal agencies to provide credit financing.
Regulations require borrowers to have established a strong credit history over a period of time to be eligible for the most attractive rates. Unfortunately, they do not take into consideration the current income of new immigrants nor their ability to service loans through their accumulated wealth in their home countries. As a result, immigrants must establish a U.S.-based credit history before they can access quality credit facilities. This can take anywhere between two and ten years, putting new immigrants at an unfair disadvantage.
What is Credit History?
An individual’s credit history is an aggregate record detailing how they have managed their debt facilities. It includes all accounts the individual has ever opened and/or closed, the type of credit provided by such accounts, outstanding balances, and a record of repayments. A credit bureau can prepare a credit report for any individual with his or her detailed credit history, personal information, and public records such as bankruptcies, liens, or pending investigations. Anyone that has had a credit account in the U.S. can request a copy of their credit report from an approved credit bureau and is eligible for one free report annually.
A credit score is assigned based on an individual’s credit history to gauge credit worthiness. This allows any future lender to assess the individual’s complete credit profile, including potential default risks.
Importance of Credit History in the U.S.
An individual’s credit history impacts many major aspects of life. Employers are increasingly referencing credit reports prior to extending new employment offers. Landlords will assess a prospective new tenant’s credit risk. Lenders providing financing options for personal loans, school loans, and credit cards will first review an individual’s credit report to determine the amount and the rates at which they will extend credit to a borrower.
For new immigrants, establishing a credit history in the United States that accurately depicts their creditworthiness can take years. In the meantime, it would be difficult for them to obtain credit options for every day needs such as credit cards or a home loan.
EB-5 investors in particular invest a large amount of money in the U.S. and maintain significant wealth in their home countries, but are often not considered to be “creditworthy” by traditional lenders due to their lack of U.S. credit history…CONTINUE READING