Bank Accounts, an SSN or ITIN, and Credit from Zero

In your home country you may have had a bank, a credit card and a long record of paying on time. In the US you start almost from zero: no Social Security number on day one, no US credit report, and landlords, phone carriers and card issuers who want both. This chapter covers the order to do things in: the identification numbers you may need, opening a bank account, building a credit history from nothing, and the cash cushion a visa makes more important than usual.

The Social Security number: who can get one

A Social Security number (SSN) is how your wages are reported and how your Social Security record is kept. The Social Security Administration (SSA) issues SSNs to noncitizens who have permission from the Department of Homeland Security to work. It does not issue one only so that you can enroll in school. The card is free.

Work visas (H-1B, L-1, O-1 and others). You are work-authorized through your status, so you can apply after arrival, with original documents such as your unexpired passport and your I-94 record. People who apply for work authorization or a green card through USCIS can often request an SSN on the same form (Form I-765 or I-485) instead.

F-1 and J-1 students. You are eligible only once you are authorized to work:

• for an on-campus job, you need a letter from your designated school official confirming your status and identifying the job, plus a letter from the employer describing it;
• for CPT, your Form I-20 with the employment page completed by the school;
• for OPT, your work permit (Form I-766);
• for J-1 students and interns, a letter from your sponsor authorizing the employment.

SSA has to verify your status with the Department of Homeland Security, and it will not process an application made too far ahead of the date your work or OPT period begins. Its publication for international students sets the current waiting periods; read it, and ask your international office, before you book an appointment.

Starting work before the card arrives. A pending SSN does not have to delay your first paycheck. IRS Publication 15 tells employers what to do when an employee has applied for an SSN but does not have it yet: report the wages and correct the record once the number arrives. Your immigration documents are what prove you may work.

The ITIN: a tax number for people who cannot get an SSN

An Individual Taxpayer Identification Number (ITIN) is issued by the IRS, on Form W-7, to people who need a US taxpayer number but are not eligible for an SSN. Typical cases are a spouse in H-4 status without work authorization who is named on a joint return, a dependent, or someone with US income but no work authorization.

The IRS is clear about its limits: an ITIN is for federal tax purposes only. It does not authorize work and does not qualify anyone for Social Security benefits. It cannot be used on a Form W-4. An ITIN that has not been used on a return for several years can expire and must be renewed before the next return.

Opening a bank account

Banks usually ask for an SSN, but whether a bank will open an account without one is the bank's own policy. Many accept a passport with your visa documents and a US address; some ask for an ITIN or let you add the SSN later.

Before choosing, check three things: that the bank is FDIC-insured (or the credit union is federally insured), which protects deposits up to $250,000 per depositor, per insured bank, for each ownership category; the monthly fee and how to avoid it; and the cost of receiving money from abroad. A checking account for your paycheck and a separate savings account for the cushion described below is a simple, sturdy setup.

Building a US credit history from zero

US credit reports are compiled from accounts that lenders report to the three nationwide credit reporting companies. A history built in another country generally does not carry over, so most newcomers begin with no file or a thin one. That affects apartment applications, phone contracts, car loans and the rates you are offered.

The Consumer Financial Protection Bureau (CFPB) lists the products designed for people new to credit:

• Secured credit card. You put down a deposit and receive a credit line of about the same amount. Use it like an ordinary card; many issuers move you to an unsecured card after a period of on-time payments. Ask whether the issuer reports to the credit bureaus.
• Credit builder loan. Often from a credit union: the loan sits in a locked savings account while you repay it in small installments, and you receive the money at the end. The payments are reported, so you build a record and savings together.
• A retail or store card. Easier to get, with low limits.

The habits that build a good score are short to list. Pay on time, every time; the CFPB stresses that on-time payment is what builds a strong history, and automatic payments help. Keep balances low compared with your limits; a widely used guideline is to stay under about 30% of your total limit. Apply only for credit you need. And you do not need to carry a balance to build a history: the account reports your on-time payments either way, and paying the statement in full each month means paying no interest.

Carrying a balance is expensive, and the cost compounds quietly:

A $3,000 balance at 24.0% paid at $120 a month takes 36 months to clear and costs $1,200 in interest. Adding $100 a month clears it in 17 months and saves $662.

Check your credit reports once your first account has been open a few months. You can get free reports from all three companies at AnnualCreditReport.com, the site the CFPB points to, and dispute any error you find.

A cash cushion sized for a visa

Everyone needs an emergency fund. A work visa adds a deadline to it. If an H-1B, L-1, O-1, E-3 or TN job ends, a grace period of up to 60 days (or until the authorized stay ends, if sooner) is generally available to find a new sponsor, change status or leave. During that time there is no paycheck, and a move abroad may follow. A cushion that covers several months of essential spending, plus the cost of a flight home, gives you time to make those choices deliberately.

With essential spending of $4,500 a month and $9,000 set aside, this household is covered for 2.0 months. A 4-month target is $18,000, leaving $9,000 still to save. Whether a visa grace period applies to you, and how long it lasts, is an immigration question for an immigration attorney.