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How to build your credit score as an international student

credit score
Getting a credit card would only help improve your credit score if you make payments on time. Source: Olivier Douliery/AFP

Establishing a credit score is one way to get ahead of your finances as an international student, particularly if you intend to live and work there after graduation. A good credit score proves you are a trustworthy candidate for future loans — such as when you buy a house or car — and it can come from various credit bureaus around the world.

For example, the FICO score is the most common way to determine credit rating in the US but it is not the only one. The UK accepts credit ratings from multiple sources, while Australia uses Equifax, Experian, and illion. In Canada, it’s Equifax and TransUnion.

According to Investopedia, a high credit score will not only increase your chances of getting your loan approved, but also open the door to the lowest available interest rates. To build a good credit score, though, you will first have to establish credit history.

There’s only one way to establish that, and it’s through years of responsible spending. With that in mind, you should begin building a credit score as early as you can if you intend to settle down overseas. Here are three ways to do that.

credit score

A good credit score proves you are a trustworthy candidate for future loans — such as when you buy a house or car. Source: Jim Watson/AFP

Get a bank account or credit card

Many young people studying abroad hold a credit card from an international bank for ease of transaction, especially for larger purchases. Select domestic banks offer credit card options for international students; getting a card from one of these institutions would be best. Since it can be challenging to get a card when you’re new in the country, you could also start by hopping onto a family card; open a supplementary account under a parent or sibling to start.

Alternatively, opening a bank account can be a good start to building your credit score. You may not even have to switch banks for this — check if your bank back home has a US branch, or open an account with your university-approved bank. You should open a checking and saving account, and regularly transfer money into it. This will show future lenders that your finances are steady, and you are able to spend responsibly.

Pay your bills on time

Once you have a bank account, it’s helpful to set up direct debit for your monthly bills. You would kill two birds with one stone: not only will your bills be paid automatically, you are also exhibiting that you can be trusted to make payments on time. This goes a long way in strengthening your credit score.

credit score

Your everyday expenditure could also help build a good credit score. Source: Ed Jones/AFP

So if you’re renting a place off-campus, pay your utility bills on time. If you just signed up for a new phone plan, pay your provider on time. Regular payments should be tracked and filed away. In the future, this will prove a track record of reliable financial habits and increase your chances of clinching that loan.

Monitor your credit score

You may also use credit monitoring services to create a profile of your credit score. These services not only show the development of your credit score, but also help you prevent identity theft and fraud. By engaging with these services, you are creating an extra layer of protection for your financial profile; mitigating issues with your credit card creates a stronger credit score in the long term as it shows lenders that you are a low-risk candidate.

Monitoring your credit score keeps you on top of your own financial health, which is a key habit to develop when studying, working, and living abroad. While some companies offer free services, you may want to opt for more comprehensive scans before applying for a big loan. If you’re still unsure about how to go about it, consult with your parents and/or a financial advisor before taking any steps.