Managing Credit Score and Establishing Credit History: One of the Challenges for New Americans.

The obstacles migrants face can range from language barriers and adapting to new cultural and societal norms, to becoming familiarized with the new laws. In order to start a new life, migrants must search for opportunities and utilize their full potential.

Many New Americans are eager for employment in order to provide for themselves and their loved ones. Sometimes, they end up working unskilled and low-paying jobs. Nonetheless, heaps of migrants have excellent work ethics and an unyielding commitment to success, even though they begin their new journey at a greater disadvantage.

From my observations, many great entrepreneurs finance and implement their good ideas through financial institutions; this method of funding often results in their success. I believe these options are best suited for New Americans in order for them to succeed financially in their respective communities.

I once heard the saying, “If one wants to play and win the game, one must be acquainted with the basic rules of the game.” Hence, basic financial literacy, whether it is balancing the household budget or managing and improving a credit score, is of paramount significance for  New Americans’ financial well being.

Every American consumer has a credit file available in the three credit bureau agencies including TransUnion, Equifax and Experian. Each consumer is assigned to a score ranging from 300 to 850. The higher the number, the better the credit score.

Since 1989, lenders have utilized the Fair Isaac Corporation’s software for calculating a person’s credit score.

During the 2008 financial crisis, the federal government and Board of Governors of the Federal Reserve took unprecedented measures aimed at stabilizing and boosting the economy. This included, but was not limited to, lowering the interest rate and bailing out certain big banks.

Lenders continue to consider other factors, such as the consumer’s overall income and the length and history of employment. However, credit score is and still remains the main driving factor in determining consumer credit worthiness. Nowadays, the credit score is not just used by lenders, but also by most insurance companies and some employers to determine insurance policy pricing and hiring potential candidates for high paying jobs.

It is vital for New Americans to comprehend the basic steps necessary to establish a good credit history and to maintain a solid credit score standing:

The first step is to establish credit. Acquiring a credit card in your name is one way to build a credit history. This can be done through one’s regular checking account.  You can reach out to your bank or other financial institutions and they will guide you through the process.

It is important to pay your bills on time in order to avoid late fee charges and potential collections. If a payment is late or overdue, it may become delinquent and can have a major negative impact on your credit score. Any negative mark on your credit report can also last as long as seven years.

If you are unable to pay your bills, reach out to your lenders before the situation becomes virtually unmanageable. You can also contact a legitimate credit counselor certified to advise on the subject matter in case your situation worsens.

Keep your balances low.  One of the common mistakes most consumers make is paying the minimum required payments, especially on unsecured loans such as credit cards. High outstanding debt can adversely affect your credit score. Pay as much as you can on your credit cards to cut down the finance charges, as they carry out the high interest rate; however, you should only use your credit cards as needed.

Diversify your debts.  Don’t put all of your eggs into one basket.  Most lenders are interested in measuring your credit risk and your ability to effectively manage your credit.  This does not mean that you open a number of unnecessary new credit cards just to increase your available credit. It would be wise to refrain from closing unused credit cards as a short-term strategy to raise your credit score.

Always have a plan B.  Every time you are going to apply for a new loan, whether secured or unsecured, do your homework and ask yourself if you really need that loan or if there are other options available for you to satisfy your financial needs. Come up with a payment plan that it is suitable for your budget.

The more you know, the more prepared you’ll be to turn your financial uncertainty into promising opportunities.

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