Applying for a Loan in the US as an Expat: Everything You Need to Know

When I first needed to apply for a loan in the US, I thought it would be straightforward. I had a decent credit score, a stable job, and I had been living here for a while. I was wrong :P The process taught me a lot about how the US financial system evaluates newcomers, and I want to share what I learned so you don't make the same mistakes I did.

The basic process is not that different from what a US citizen would go through -- you fill out an application, provide documentation, and undergo a credit check. However, there are a few key things to keep in mind if you're an expat.

Second, before you even consider applying for a loan, you need to build up your credit score. Check out my post about going from zero credit history to a credit score of 720+ in about five months. If you don't have a strong credit score, your chances of getting approved for a loan are slim to none.

Third, even with a credit score of 740+ after 8-9 months of living in the US, your credit history is likely still poor because your oldest financial account in the US is less than one year old. So that means you will likely be rejected when applying for a loan. Loan application and decision are mostly done online now so it is the algorithm that will determine your approval, not a human (with subjective feeling).

There is just not enough history about you (or high quality signals) as an individual for the algorithm to do an assessment.

So what did I do? Knowing that the algorithm/machine needs more data points, and more signals so that it can evaluate my creditworthiness, I purposely keep many of my financial assets and financial activities with a single financial institution. This way, they will have a lot more information about me than normal. Basically, I try to feed more data to the algorithm/machine than what it normally has access to.

What type of financial assets or financial activities we are talking about here? Below is my answer based on common sense.

• Direct deposit of your salary.
• Credit card usage and on time full balance payment.
• etc...

So what was the result? As expected, when I applied for a loan, a typical financial institution said no because of the lack of credit history. However, the financial institution that I purposely tried to give more data, more signals to say Yes.

Before you agree to the loan, make sure you understand the interest rate and fees associated with each loan. Read the fine print before signing any loan documents. This is especially important if you're an expat, because there may be some clauses in the contract that you don't fully understand. If you have any questions, ask the loan officer before you sign anything.

At the end of the day, the key insight is to think like the algorithm -- give it more data about yourself, and it will be more confident in approving you. And once you have the loan squared away, make sure you freeze your credit reports to protect the credit history you have been building so carefully.

Have you applied for a loan in the US as an expat? I would love to hear about your experience, especially if you found other strategies that worked.

Cheers,

Chandler

P.S: I recently created a group on Facebook called Asian Expats in the US so that we can share/discuss more tips directly. Feel free to join.