In the US, your credit score determines nearly everything related to money — from renting an apartment, buying a car on installment, getting a mortgage, to opening a phone plan or even landing certain jobs. For newcomers, international students, or sponsored immigrants just arriving in America, this is often a completely foreign concept since Vietnam has no equivalent system. This article will explain in detail what credit is, why it matters, and how to build a solid credit profile from zero.
In America, having no credit history is almost as risky as having a bad one.
What is Credit, and Why Does America Care About It So Much
Think of your credit score like a "financial conduct report" that follows you throughout your life in America. Every time you borrow money — whether swiping a credit card, financing a car, or taking out a mortgage — lenders report to three major credit bureaus: Equifax, Experian, and TransUnion, whether you paid on time. That data is compiled into a single number, typically called a FICO score or VantageScore, ranging from 300 to 850. The higher your score, the more trustworthy you're seen as a borrower.
Paradoxically, having no credit history is almost as risky as having a bad one. Landlords, insurance companies, and banks look at your blank record and don't know how much to trust you — as a result, you might get denied, have to pay higher deposits, or face higher interest rates compared to someone with a good history.
Five Factors That Determine Your Credit Score
According to the Consumer Financial Protection Bureau (CFPB), your FICO score is calculated based on five groups of factors, and they don't all carry equal weight.
Payment history accounts for the largest share, about 35%. This simply means whether you pay your credit card bills and loan payments on time. Even a single late payment over 30 days can significantly lower your score and stay on your record for up to seven years.
Credit utilization accounts for about 30%. This is the ratio between the money you owe on credit cards versus your credit limit. For example, if you have a card with a $1,000 limit and spend $900 every month, your utilization ratio is 90% — a number considered high risk, even if you pay on time and in full.
The other three factors carry less weight but are still worth noting: length of credit history (about 15%, meaning longer-open accounts are better), diversity of credit types such as credit cards, auto loans, and mortgages (about 10%), and how many times you've applied for new credit recently (about 10%, since applying for too much at once signals financial distress).
Starting From Zero: First Steps
For newcomers to America, the biggest challenge is having nothing for banks to look at. There are three common ways to break the vicious cycle of "no history means no one will lend, and no one lending means no history.
The first and most accessible route is a secured credit card. With this type of card, you deposit collateral — usually between 200 and $500 — and the bank grants you a credit limit equal to that amount. You use the card like a regular credit card, paying on time each month, and after six months to a year, many banks will upgrade you to a regular credit card and return your deposit. Major banks like Discover, Capital One, and Chase all offer products specifically for people building credit.
The second route is becoming an authorized user on a credit card belonging to a trusted family member with good history — for example, parents or older siblings who have lived in America for years. The primary account's history gets added to your credit file, even though you're not the main person responsible for repayment. This is quick and low-risk, but you need to choose someone with a habit of paying on time, because if they miss a payment, your score gets hurt too.
The third route is a credit-builder loan, a somewhat unique product offered by many credit unions and smaller banks. Essentially, the money you "borrow" is held in a frozen account, and you make monthly payments like a real loan. Once you finish paying, you get all the money back while building a payment history to add to your record.
Social Security Numbers, ITINs, and Visas: Frequently Asked Questions
Many newcomers wonder whether they can build credit without a Social Security Number (issued by the Social Security Administration, SSA). The answer is yes, but with limitations. If you have an Individual Taxpayer Identification Number (ITIN) issued by the Internal Revenue Service (IRS), some banks like Chase and many credit unions still accept applications for secured credit cards using an ITIN. International students on F-1 visas or H-1B work visa holders typically already have valid Social Security Numbers and can access the full range of credit products available to US citizens.
One important note: credit history from Vietnam or any other country does not transfer to the US system. Even if you had an excellent credit card record in Vietnam for years, when you come to America you still start from zero. This is something that frustrates many Vietnamese newcomers, but it's a universal rule applied to all immigrants, not unique to the Vietnamese community.
Common Mistakes That Make Credit Scores Hard to Improve
A common misconception in the Vietnamese community is the belief that "not using credit cards, only using cash" prevents debt. In terms of frugality, this is a good habit, but for building credit it backfires — with no credit activity to report, your file stays empty even though you've never owed anything.
The second mistake is paying only the minimum payment each month. This avoids late fees, but leaves a large balance outstanding, pushing your credit utilization ratio high and forcing you to pay unnecessary interest. The best approach is still to pay the full balance every month before the due date.
The third mistake is closing old credit cards as soon as you stop using them, especially your first card when you arrived in America. Since credit history length is a scoring factor, closing an old card can lower the average age of your credit file, reducing your score slightly even though you haven't done anything wrong.
Do's and Don'ts When Building Credit
- ✅ Do: Set up automatic payments (autopay) for at least the minimum amount to never miss a due date, even if you forget.
- ✅ Do: Keep your credit utilization ratio below 30%, ideally below 10%, by paying your card multiple times a month instead of waiting until the due date.
- ✅ Do: Check your credit report for free once a year at AnnualCreditReport.com, a site run by the three major credit bureaus under federal law, to catch errors or signs of identity fraud early.
- ❌ Don't: Open multiple credit cards at once in a short period just to "try your luck," because each application leaves a hard inquiry that temporarily lowers your score.
- ❌ Don't: Ignore small bills like postpaid phone bills or library fines — if sent to collections, they'll still show on your report and hurt you as much as a large loan.
How Long Until You Have a Score, and How Long Until It's Good
Typically, after opening your first credit account and having at least one reported activity, you'll get your first FICO score after about six months. This is the minimum threshold for the system to have enough data to calculate. From there, if you maintain a habit of paying on time and keep your utilization low, many people reach "good" credit (usually 670 or above on the FICO scale) within 12 to 24 months.
An "excellent" credit score (above 800) typically requires many years of discipline, including diverse credit types like auto loans or mortgages. This isn't a sprint but a marathon — similar to building reputation in a community, it takes time to build but can be lost quickly if you're careless.
A Perspective Unique to Vietnamese Americans
In the Vietnamese community, especially in areas with large Vietnamese populations like Little Saigon in Orange County or Houston, many families use cash to buy cars and homes for their children, or avoid bank loans out of fear of debt. This can help avoid interest, but it prevents young people in the family — especially international students or sponsored immigrants newly arrived — from building credit early.
One practical solution many Vietnamese families use is making their children authorized users on their own credit cards while they're still studying, as long as the parents have good payment history. Additionally, banks with many Asian customers like East West Bank or Cathay Bank, which are familiar to the Vietnamese community in California and Texas, often have Vietnamese-speaking staff who can explain secured credit card products in detail — worth considering for those not yet confident with English transactions.