Study Loan In the USA
Studying abroad is a dream for many international students. The United States of America, with its world-class educational institutions and diverse culture, is a popular destination for students seeking higher education opportunities. However, pursuing studies in the USA can be financially challenging for international students. To overcome these challenges, many students turn to study loans.
The Significance of Building Credit History
When it comes to applying for study loans in the USA, having a solid credit history is crucial. Credit history is a record of an individual’s borrowing and repayment activities, which helps lenders assess the creditworthiness of applicants. Building a good credit history is essential for international students as it not only improves their chances of getting approved for study loans but also allows them to enjoy several long-term financial benefits.
The American Credit System
In the United States, the credit system plays a vital role and is an important aspect of their financial infrastructure. It is based on the principle of trust and enables individuals to access various financial services such as loans, credit cards, mortgages, and more. The credit system is built on the foundation of credit scores, which are numerical values assigned to individuals based on their creditworthiness and financial history.
Challenges for International Students
For international students, establishing a credit history in the USA can be challenging due to several factors. Firstly, they often do not have a social security number, which is required by most lenders to verify the identity of borrowers. Additionally, many international students might not have a steady income source or a substantial financial record, making it difficult for lenders to evaluate their ability to repay loans.
Benefits of Building Credit History
Building a credit history is a valuable investment for international students, as it opens up a world of opportunities. Here are some important benefits:
1. Increased Loan Approval Chances
Having a strong credit history significantly increases the chances of loan approval. Lenders consider a good credit history an indication that the borrower is reliable and capable of repaying the loan on time. By building a credit history, international students can enhance their eligibility for study loans and secure the necessary funds to pursue their education.
2. Lower Interest Rates
A good credit history allows students to access loans at lower interest rates. Lenders are more willing to offer favorable terms, such as lower interest rates or reduced processing fees, to borrowers who demonstrate responsible credit behavior. By building a positive credit history, international students can save a substantial amount of money in interest payments throughout their loan repayment.
3. Establishing Financial Independence
Building credit history in the USA empowers international students to establish their financial independence. Having a solid credit record enables students to access various financial services without relying on a co-signer or a guarantor. It provides them with the flexibility to manage their finances and make independent financial decisions.
4. Access to Other Financial Opportunities
Once international students have established a good credit history, it becomes easier for them to access other financial opportunities. They can apply for credit cards, open bank accounts, and even secure rental agreements without facing significant hurdles. A strong credit history serves as a foundation for future financial endeavors and creates a positive financial reputation.
Strategies to Build Credit History
For international students seeking study loans in the USA, here are some effective strategies to build a credit history:
1. Obtaining an Individual Taxpayer Identification Number (ITIN)
An Individual Taxpayer Identification Number (ITIN) is an identification number issued by the Internal Revenue Service (IRS) to individuals who are not eligible for a Social Security Number but need to fulfill their tax obligations. International students can apply for an ITIN to establish their identity and open the door to various financial opportunities.
2. Applying for a Secured Credit Card
A secured credit card is an excellent tool for international students to kickstart their credit journey. These cards require a cash deposit as collateral, making them less risky for lenders. By utilizing a secured credit card responsibly and making timely payments, students can build a positive credit history.
3. Becoming an Authorized User
An international student can become an authorized user on a credit card held by a trusted family member or relative who is a U.S. citizen or permanent resident. This allows the student to benefit from the primary cardholder’s positive credit history, as the activity on that card is reported under the authorized user’s name as well.
4. Making Timely Payments
Timely payment is essential for building credit history. By paying bills, rent, and any other obligations on time, international students can demonstrate their reliability and financial responsibility. Consistency in making timely payments positively impacts their credit score and enhances their creditworthiness.