Credit in the US

DISCLAIMER: The content on this page is general information only. ISPaSO recognizes that each individual’s situation is unique and your credit decisions should be based on your unique situation and strategy.

Ways to build credit

There are many ways to build credit in the United States, each with their advantages, that work best for different situations.

  • Credit card (free*)
  • Utilities & Bills
  •  Loans
  • Credit Builder loans

Your Credit File and Score

Two main models of credit scores, FICO and VantageScore (established 2006). The models also have different formulas that will give different scores. FICO (introduced 1989) is older and used by 90% of large lenders[5].


Each model also has different versions. VantageScore currently has versions 1.0, 2.0, 3.0 and to 4.0, while FICO has at least 16 versions[1].

Apart from FICO and VantageScore, there are other scoring models. Some companies have their own proprietary scoring models that they use to determine whether and how much to lend to individuals. This means that your “score” changes depending on which company/lender is assessing you. The score at the end of the day is just a numerical indicator of how good your credit is.

Credit Cards

Credit Card Terms

  • Annual Percentage Rate (APR)
  • Annual Fee (AF)
  • Grace Period
  • Credit Line Increase (CLI)
  • Credit Line Decrease (CLD)

What to look for when applying for a Credit Card

When you apply for a credit card, it is a good idea to look through the agreement for the rates and any fees on the card. These will usually be put in a box-table called the “Schumer Box”.

Schumer Box - Fees and rates for a credit card.
[Source: The Ascent]

Grace Period

A grace period is what allows you to use your credit card without incurring interest as soon as you swipe it. You should look for a grace period in the agreement and terms of a credit card before you apply for it. Most cards have a grace period of between 21-28 days. However, there are a few cards that do not offer a grace period at all.

To see how long the grace period of your card is, look for the phrases, “Grace Period”, or “Paying Interest”, or “How to Avoid Paying Interest”.

Purchase Annual Percentage Rate (APR)

This is the interest you accumulate whenever you use your credit card to make a purchase. This interest is only charged if you do not pay up the statement balance on the credit card bill within the grace period.

Annual Fee

This is the amount you are charged annually to use the card. There are many cards without an annuall fee you can start with. Most cards that charge an annual fee have lots of rewards and bonuses so that you can usually “make back” the annual fee.

Cash Advance Annual Percentage Rate

A credit card cash advance is a withdrawal of cash from your credit card account[7]. So if you went to an atm and withdrew cash from your credit card, that would be a cash advance. The interest you are charged on a cash advance is called a cash advance APR.

Most credit cards do not offer a grace period for cash advance transactions. This means that interest on a cash advance will start to accumulate from the moment you make that withdrawal.

Balance Transfer Annual Percentage Rate

This is the interest you accumulate whenever you transfer debt or a credit card balance from another card to your card.

Transaction Fees

Some cards will charge a balance transfer fee, a cash advance fee, and a foreign transaction fee. Look in your agreement so you know how much you are paying when you make those kinds of transactions. Purchases (ie swiping your card at a POS or paying online with your card) should not typically incurr any fees.

Penalty Fees

These include late payment fees, returned payment fees, and fees for going over the credit limit.

Other Fees

A small amount of cards will charge some extra fees, like account opening fee. You should steer away from such cards. Look carefully in your agreement to make sure you aren’t paying any extra fees.

Your Credit Card Statement / Bill

Every month, you will receive a credit card statement from your credit card company. This statement will include the transactions you have made for the statement period, and some other information pertaining to how and when you should pay your bill. Always review your statement when you get it. Make sure there are no strange or fraudulent transactions, or other errors in your statement. If you find any issues, you should call your credit card company.

The following is information you will find concerning the payment you should make to the credit card company.

Statement Balance

This is the amount you have to pay the credit card company to avoid incurring any interest. It will typically have the word “Statement Balance” or “New Balance” or some other word pairing with “Balance” to highlight it. Make sure you pay this when you receive your statement or bill from the credit card company. As long as you pay this amount, you will not incur any interest.

Minimum Payment

This is the minimum you have to pay the credit card company to avoid receiving any deregoratory marks in your credit file. If you can’t afford to pay the statement balance, make sure you pay this at least. You will incur some interest but your credit report will show that you pay on time, which is what creditors are looking for.

Due Date

This is the deadline to pay the credit card bill. The due date can be calculated by adding the grace period to the date your statement was generated. So for example, if your card has a grace period of three weeks, then your due date will be three weeks after your statement or bill is generated. It is important not to miss this date and pay at least your minimum balance before this date passes.

Be aware some payment types will not post until a certain number of business days, for example, ACH payments can take up to 5 days to clear. Also be conscious of bank holidays if you decide to make your payment too close (under 1 week) to your due date. If possible, pay your credit card bill as soon as you receive your statement, or at least 7 days before the due date.

You can also set up automatic payments (autopay) on your credit card app or website as a backup payment method. Some people like to set automatic payments for their minimum balance so that even if they forget to pay their bill, they won’t get any “missed payment” notes in their credit file.

Even after you setup autopay, always check that your credit card bill has been paid. In some very rare occasions, autopay has failed.

How to Build and Maintain a Strong Credit Profile with a Credit Card

Keep a Budget

Keep a budget and look at it before you make any spending decisions. Remember, a budget is a living, breathing document. Just because you planned to spend money a certain way at the beginning of the month doesn’t mean you have to stick to that throughout the month. If something changes, adjust your budget.
If one Saturday you wake up and think you should go to town and eat at a fancy restaurant, take that money out from somewhere in the budget and assign it to your fancy dining.

Avoid spending more than you have on hand. Also make sure that any ACH spendings you have or are planning to make will not eat into your credit card budget. If you’ve made a payment into your prinbill account, make sure you’ve accounted for that in your budget.

Avoid Credit Float

Avoid Credit Float. Credit float is when you put charges on your card that you don’t have the money for now, but you “know” that you will at some time in the future. It’s a very bad habit to get into and can very easily lead to credit card debt which is the worst type of debt to get into. To avoid credit float, avoid spending money that you do not currently have in your checking account.

I’ve tried and I just can’t stop overspending, but I really want to build my credit. What do I do?

  • Get a credit card, put a small recurring charge (less than $50) on it and setup autopay from your bank to pay the credit card statement balance every month. Put the card away so you wont be tempted to overspend. Review your statement when it is generated (once a month). Pay your statement balance well before the due date.
  • Consider getting a credit-builder loan.

Credit Card Rewards

There are three types of credit card rewards: cashback, points, and miles. Cashback is quite easy to understand and great place to start from when playing with credit card rewards.

Recommended Credit Cards (In order of ease)

This article is geared towards international students who likely have very little experience with the credit system in the United States, hence all the cards mentioned in the “Notable Offerings” subsections have no annual fee.


Discover has many great offerings. It is a good place to start for people with no credit history.


Notable Offerings
  • Discover It
  • Discover Student It
  • Discover Student Chrome


CapitalOne is another company that is likely to extend credit to individuals with little to no credit history. It has many great offerings. If you’re considering starting your credit journey, this is a good place to start.


Credit Unions

Credit Unions are also a good place to start your credit journey.  You’ll have to look for a credit union in your area. A lot of credit unions require that you become a member in order to get a credit card from them. Some credit unions require that you are a US resident. Luckily there are many credit unions so you’ll have a lot to explore.

US Bank

US Bank has many cards with great rewards, however, they tend to reject applicants with less than 6 months of credit history.


Notable Offerings
  • US Bank Cash+ Visa Signature


Chase offers a good amount of point rewards cards. Some of their cards have annual fees, but the rewards on the cards are enough to offset the cost of the annual fee. It is a good idea to figure out whether a card with an annual fee is right for you before applying.

Chase usually requires that you have at least 1 year of credit history to be approved for a credit card.


Notable Offerings
  • Chase Freedom Flex

American Express

Most of their cards have annual fees, however those cards come with huge signup bonuses and heavy rewards. There are a few Amex cards with no annual fees. Some of the cards seem to be better suited for high-earning professionals living in urban areas. Most of their cards also offer perks like airport lounge access.


Notable Offerings
  • Amex Blue Cash Everyday® Card
  • Amex EveryDay® Credit Card

Credit Cards to Avoid

Not only can a bad credit card strain you financially, but in some cases, it can also ruin your credit. Here are some things to look out for (and avoid) when applying for credit cards.

Cards with no grace period

Cards with no grace period. Always make sure you look through the credit card agreement for a grace period on purchases (purchase APR). Typically cash advances and balance transfers will not have a grace period, however, purchases should have a grace period. Avoid any card that doesn’t offer a grace period on the Purchase APR.

Annual fees that are not justified

Cards that charge an annual fee will usually offer a huge signup bonus and many rewards to offset the annual fee. Many people have found that with a card with rewards that fit their lifestyle, they are able to make the annual fee back at least 1.5x. If you’re looking a card, avoid signing up for a card that has an annual fee with no or minimal rewards. Also, just because a card has great rewards doesn’t mean it’s right for you. If a card offers great rewards on travel and hotels but you don’t travel enough, the annual fee you’re paying is wasted. It’s a good idea to look at cards that have annual fees and their offerings so you get a sense for what a card that charges an annual fee will offer.

When you’re starting your credit card journey, it’s best to avoid cards with annual fees until you get a feel for your spending habits and how you use your credit.

Cards that are hard to cancel

You might catch in a credit card agreement, that a card is hard to cancel. This may not be a problem, however, there are cards with annual fees and other extraneous fees like “Account Opening Fee” that have a reputation for being hard to cancel. These cards will usually charge those fees to your credit card, so if you decide not to use the card, you will still accumulate charges on the card that you have to pay off before the card’s due date.

When you are thinking of applying for a card, research the card company and look out for cards that people have a hard time cancelling

What to do if you're having trouble getting approved for a credit card.

  • Call a reconsideration line if you get denied for a card.
  • Get a secured credit card

Credit Myths

You need to keep your credit utilization under 30% to have a good credit score

One of the factors that affects your credit score is credit utilization. Credit utilization is a view of how much credit you are using compared to the amount that is credit available to you. The lower your utilization, the better your score. However, the effect from credit utilization on your credit score is temporary. Your most recent utiliztion is used to calculate your score. Also, credit utilization is sometimes retrieved realtime. It’s not like a GPA where a bad grade one semester will affect your GPA till you graduate. The best thing to do is focus on making your payments on time every month and never missing a payment. Unlike utilization, missing a payment will be on your record for a long time and can adversely affect your score.

NOTE: The previous paragraph does not apply to VantageScore 4.0 which considers historical utilization rate when scoring.

The best and most natural way to lower your utilization is to get a credit limit increase. If you have more credit available to you than you typically use, your credit utilization will naturally be low. You can request a credit limit increase from your credit card company. You’ll need to have been using that card responsibly for several months. Another thing to note is that if your utilization on that card is too low, some credit card companies might refuse to raise your limit. For example, if you have a card with a limit of $500, you’ll have better luck requesting an increase if you’re spending $300 every month than if you were spening $50 every month. Some companies will automatically increase your credit limit if they notice you are constantly getting close to your limit (but still being responsible and paying off the balance every month).

In some situations however, you might need to temporarily lower your utilization. This is usually when applying for new credit (eg, loan, new credit card). In this case, all you’ll need to do is keep your utilization low for about 2 months before you apply for the credit.

You need to carry a balance to have a good FICO score

You do not need to carry a balance on your card(s) to have a good credit score, however, you can still have a good credit score even if you carry a balance. The only thing that matters to your score is whether you pay at least the minimum balance every month and whether or not you miss a payment.

Identity Theft and Your credit

There are six official consumer credit reporting agencies, four of which are widely used[2]. These are

  • Experian

  • TransUnion

  • Equifax

  • Innovis

You can monitor your credit with each of the credit bureaus for free. Now, each one will probably have limits on how often you can view your credit report. For example, TransUnion allows you to view your credit report for free 6 times a year.

Another thing that is really important to do is to freeze your credit file. To open a line of credit in your name, all a person really needs is your social security number. In the past, there have been many hacks and data breaches and there probably will be mroe, so it is not enough to assume your SSN is safe. The best thing to do to protect your credit is to keep your credit frozen and only unfreeze it temporarily when you want to apply for credit (eg loans, credit cards, financing, etc).

You can monitor and freeze your credit with each of the bureaus for free, but many will try very hard to get you to pay. Take note that you do not have to enter your credit or debit card information to sign up, freeze or to monitor your credit.

Experian: Monitoring and freezing your credit file

Create an account. You will get updated information about your score and credit report about every two weeks

TransUnion: Monitoring and freezing your credit file

Go to and create an account.

Click on “Member Login”

Select the Login button under “Service Center”

Click “Create Account” or “Login” if you already have an account.

To freeze your credit file, you’ll need to create an account. If you haven’t created an account, go to: Click on “Add a Freeze” and you will be redirected to the Account creation form where you’ll sign up and be redirected to your dashboard. 

If you already have an account, login and skip to the next step.

On your dashboard, click “Credit Freeze” and follow the instructions on the page to freeze your file.

To view your credit report (you are limited to 6 free reports a year), click “Credit Report” on the dashboard.


Go to You can also do a google search, it will usually be the first item in the search results.

Click Login in the menu, and then Login under myEquifax

After you login, you will be directed to the myEquifax dashboard. Here, you can freeze your credit file and view your credit report.

Equifax has a limit of 6 (free) credit reports every year


Go to If you click Personal, a dropdown will appear and you can choose to view your credit report or freeze your file.

You can also go directly to the Security Freeze page on Innovis to freeze your credit file.

To order your credit report, click Credit Report on the Innovis website.