Securing a business credit card can be a significant step toward financial growth for non-residents looking to establish a business in the U.S. Obtaining a business credit card often requires a strong personal credit score.
This guide will help non-residents with an Individual Taxpayer Identification Number (ITIN) build personal credit. It will enable them to secure business credit cards with limits ranging from $2,500 to $5,000, then moving to $10,000 or more in the first couple of years.
Why Personal Credit Matters for Business Credit
Credit card issuers often consider your personal credit history when evaluating your business credit card application, especially if your business is new. A solid personal credit score demonstrates financial responsibility and reduces the risk for lenders.
Steps to Build Personal Credit with an ITIN
1. Apply for an ITIN
If you haven’t already, apply for an ITIN through the IRS. This number is crucial for tax reporting and is often accepted in place of a Social Security Number (SSN) for credit applications.
2. Open a U.S. Bank Account
Establishing a bank account in the U.S. using your ITIN is essential. This account will be useful for managing your finances and proving your presence in the U.S. to credit card issuers.
3. Get 4-5 Secured Credit Cards
Secured credit cards are one of the best ways to build personal credit. These cards require a refundable security deposit, which typically becomes your credit limit. Ensure you choose a card that reports to all three major credit bureaus: Equifax, Experian, and TransUnion. This strategy is used to help build personal credit after a U.S. resident files for personal bankruptcy.
4. Use Your Secured Credit Card Responsibly
Make Small Purchases: Use your secured credit card for regular, small purchases to keep your utilization low.
Pay On Time: Always pay your full balance by the due date to avoid interest and build a positive payment history.
Keep Utilization Low: Aim to keep your credit utilization ratio below 30% of your credit limit. This demonstrates responsible credit management.
5. Monitor Your Credit
Regularly check your Equifax, Experian, and TransUnion credit reports to track your progress and ensure no errors. Use free services like Credit Karma or AnnualCreditReport.com for this purpose. The best personal credit monitoring service is MyFico.com.
6. Build Your Personal Credit Score
Building a personal credit score from scratch using secured personal credit cards with an ITIN typically takes some time and consistent effort.
Here’s a general timeline and what you can expect:
Initial Credit Building Timeline
- First 3-6 Months:
- Initial Reporting: After opening secured credit cards, it may take 1-2 billing cycles (about 2-3 months) for your activity to start being reported to the credit bureaus.
- Establishing a Score: During this time, your credit file will begin to establish, and you may see an initial credit score formation.
- 6-12 Months:
- Building History: You will start building a credit history by consistently using and paying off your secured credit cards each month. Regular payments and low credit utilization are key factors.
- Credit Score Growth: Typically, after about six months of consistent and responsible use, you should have a visible credit score. Aiming for a good score (670 or higher) is realistic within this period if you maintain excellent credit habits.
- 12-24 Months:
- Strengthening Your Score: Continued responsible use of your secured credit cards will further strengthen your credit score. You may have a well-established credit profile by the end of one year.
- Transition to Unsecured Cards: Around this time, you can consider applying for unsecured personal credit cards. Many issuers prefer a credit history of at least one year before granting unsecured credit.
Key Factors Influencing the Timeline
- Payment History: It is crucial to make timely payments. Late or missed payments can significantly delay building a good credit score.
- Credit Utilization: Keeping your credit utilization below 20% of your total available credit helps improve your score.
- Number of Accounts: Having 4-5 secured credit cards is beneficial as it shows multiple lines of credit, contributing positively to your credit profile.
- Length of Credit History: While you can see initial improvements within 6 months, the length of your credit history also plays a role. The longer you maintain responsible credit use, the better your score will be.
Summary
- 6 Months: You can expect to see an initial credit score if you’ve used your secured credit cards responsibly.
- 12 Months: By this time, you should have a solid credit score and may be able to apply for an unsecured personal credit card.
- 24 Months: Responsible credit use will further strengthen your score, making you an even more attractive candidate for higher credit limits and better credit card offers.
In conclusion, starting with no credit history on an ITIN, it usually takes about 6-12 months of responsible use of secured credit cards to build up enough credit score to apply for unsecured personal credit cards. Maintaining good credit habits will ensure continued improvement and access to better credit options.
Here’s a breakdown of what you should aim for:
Good Credit Score: 670-739
Very Good Credit Score: 740-799
Excellent Credit Score: 800 and above
Reaching a score of 700 or higher is typically necessary to qualify for most business credit cards with the desired limits.
Applying for a Business Credit Card
You can apply for business credit cards once you’ve built a good personal credit score. A strategy is to apply for business credit cards to maximize your results. Be careful of credit card stacking offers that take 9% of your total amount; that money is the expense.
As a non-resident, you will secure the business credit cards in the name of your U.S. LLC. Over time, with a good payment history and low debt utilization on your personal and business credit, you can secure more business credit cards. Regarding business lines of credit and loans, banks typically look at two years of financials and your personal credit score.
Final Thoughts
Building personal credit on an ITIN as a non-resident may take time and effort, but it’s a critical step toward securing business credit cards for your LLC. By following these steps, using secured credit cards responsibly, and maintaining a good credit score, you’ll be well on your way to accessing the financial tools needed to grow your business in the U.S.
Remember, financial responsibility and consistent credit monitoring are key to achieving and maintaining a strong credit profile. Building your credit score on an ITIN as a non-resident with a U.S. LLC requires careful planning as part of your U.S. e-commerce expansion. Start with a consultation to develop your plan. Learn more here.
