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After arriving to the U.S., an undocumented immigrant must deal with so many things that are foreign to them. Among them: the U.S. financial system, which can be tough for even those born in the States to navigate.
Getting a credit card may be one of the items on the financial to-do list of an undocumented immigrant. Undocumented immigrants can apply for a credit card in the U.S., but they might need to jump over some hurdles to do so. These could include obtaining a federal tax ID number or qualifying for a secured credit card.
“Many people we speak to in the immigrant community struggle with accessing credit because they have not had access to financial education about their rights in the financial system,” says Adina Appelbaum, immigration attorney, accredited financial counselor and co-founder of Immigrant Finance.
Immigrants tend to rely on high-cost alternative financial services, such as check-cashing companies, payday lenders and pawnshops, at a great expense. Meanwhile, traditional banks’ services tend to be much more reasonably priced. An undocumented immigrant’s financial education should focus on high-cost alternative financial services, says Magnus Larsson, co-founder and CEO of Majority (a digital bank meant for migrants).
Do you need a Social Security number to get a credit card?
No federal law prohibits an undocumented immigrant from getting a credit card in the U.S., Applebaum explains.
Based on their corporate practices, some credit card issuers require an applicant to provide a Social Security number. However, many credit card issuers accept an individual tax identification number as an alternative to a Social Security number. The nine-digit ITIN, though similar to the nine-digit SSN, is issued for tax purposes and does not make you authorized to work in the U.S. nor eligible to receive SSN benefits.
Even with an ITIN, an applicant might not be approved for a credit card if they lack a credit history. Having no credit history is not inherently bad, it only means you have never used any credit-building financial products, such as a credit card or loan, in the U.S.
If a Social Security number or ITIN isn’t an option, some credit card issuers might accept an applicant’s foreign passport or U.S. driver’s license. Yet another alternative is Nova Credit’s Credit Passport, which an issuer can use to look at an applicant’s overseas credit history.
Credit card issuers that do not require an SSN
Credit card issuers that do not require an SSN include:
- American Express
- Bank of America
- Capital One
How an undocumented immigrant can apply for a credit card
Contrary to popular belief, there are many alternative ways an undocumented immigrant, with no credit history recorded in the U.S., can get a credit card.
Get a secured credit card
Unlike an unsecured credit card, a secured credit card typically requires a cash deposit that serves as collateral. The collateral protects the card issuer by securing repayment of any debt you may accumulate on the card. The credit limit for one of these cards is typically 50 percent or 100 percent of the deposit amount.
The goal of a secured credit card is to help someone build their credit history and then graduate to a traditional unsecured credit card. Most, but not all, secured credit cards report a cardholder’s payment history to the credit bureaus, which slowly helps your credit score increase. If this information isn’t reported, then your credit score won’t increase, so be sure to apply for a secured card that regularly reports your payment activity.
Ask someone to be a co-signer
Another way to obtain a credit card is to find a co-signer. Under this arrangement, someone else (often a relative) agrees to cover card payments or the entire balance if the main cardholder isn’t able to do so. Keep in mind, though, that many of the major credit card issuers don’t allow co-signers.
Become an authorized user
You could also ask to be added as an authorized user on someone else’s credit card. As an authorized user, you get your own card connected to the primary cardholder’s credit line. This allows you to use the card for spending and enjoy any card benefits.
The account holder is financially responsible for the monthly card payments and the entire balance on the card, though of course you can make arrangements with the primary cardholder to pay them your balance every month. The person whose card account you join is usually a spouse or relative, but a friend is also possible — as long as they’re trustworthy and financially responsible.
If you or the main account holder makes on-time payments each month, it will positively reflect on both your credit reports, since the payment history is regularly reported to the credit bureaus. It could be quite advantageous for both parties. Some credit issuers do not report the authorized user’s activity, so be sure your issuer does before becoming a user.
Apply for a joint account
Another option is applying for a joint credit card account with someone else, like a spouse or family member, which basically makes both of you the primary cardholders and responsible for covering the balance. The main appeal — perhaps with both your incomes, the issuer will feel more confident to extend you credit.
As with an authorized user, each joint account holder’s payment activity generally is reported to the credit bureaus. So, if payments are made on time and regularly, you could see your credit history gain strength. However, note that many card issuers no longer offer joint credit accounts.
Get a credit card for no credit history
Some card issuers might be willing to approve an undocumented immigrant for a traditional unsecured credit card even if they don’t have a credit history. It’s worth noting, though, that cards for no credit history might come with drawbacks like a higher-than-normal interest rate or a lower-than-usual credit limit. Nevertheless, if you are diligent in not overcharging your card and paying your bills on time every month, these cards work just as well in building your credit.
Applebaum says that in many other countries, credit is less commonly used than in places like the U.S. Therefore, an undocumented immigrant may arrive in the U.S. without a credit history.
“For immigrants who do have credit histories from their home countries, many are not able to transfer their credit histories once they arrive in the U.S., so they have to start from scratch,” she says. “Additionally, people who do not have immigration status or who have uncertain, temporary types of status or are in between statuses can have difficulty opening credit cards and not know whether they are eligible to have them in the first place.”
How to build credit as an undocumented immigrant
“Learning how to manage a credit card responsibly and pay it off in full every month over time is one of the best ways to build a strong credit score through payment history and length of credit history,” Applebaum says.
Payment history makes up 35 percent of your FICO credit score, the most widely used scoring model, while length of credit history represents 15 percent. Here are some other tips you could try to build your credit:
- Open a bank account in the U.S. Some credit card issuers may require that an applicant have a U.S. bank account.
- Pay all of your bills, such as rent and utility bills, on time every month. Not only will you get used to paying your bills regularly, but you can also get those payments included on your credit report via Experian Boost.
- Maintain a low overall amount of debt. The amount of debt you’re carrying relative to your total credit limit, also known as your credit utilization ratio, makes up 30 percent of your FICO credit score. “Don’t get caught in the spiral of expensive credit,” Larsson advises.
- Look into transferring your credit history from your home country to the U.S. Larsson says credit card issuers “need to move beyond the existing credit score system” to take into account disadvantaged consumers like undocumented immigrants.
- Avoid applying for too many credit cards around the same time. Those with credit scores would experience multiple hard inquiries, which will lower your score by a few points. As for no-credit individuals, you still shouldn’t apply for too many cards at once — lenders will think you’re in financial trouble and are a bigger credit risk.
- Steer clear of payday loans. The APR for a payday loan can be 400 percent or more, which is far above the typical APR for a credit card or personal loan. Larsson calls payday loans an “evil” form of credit that preys on undocumented immigrants.
The bottom line
Working your way through the U.S. financial system as an immigrant, including the process of getting a credit card, can be intimidating. “The system is not built for people that are not born and raised here when it comes to finance,” Larsson says.
Fortunately, credit cards are available to undocumented immigrants, though they may be tough to qualify for. And, there “is no shortcut,” Larsson explains.
You don’t necessarily need a Social Security number to qualify for a credit card. In addition, several credit options are available for undocumented immigrants who hope to obtain a credit card. These include a secured credit card, which requires a cash deposit, or a credit card designed for someone who lacks a credit history. By putting in some work during the application process and being responsible with credit, an undocumented immigrant may join the more than 80 percent of adults in the U.S. who have credit cards.