Myth: Foreigners with Individual Tax Identification Numbers (ITIN) can’t build their credit history.
Truth: It is true that ITIN holders initially are limited in the type of credit they can immediately access. But like any American resident, there are several ways non-residents without a Social Security Number (SSN) can slowly build their credit and open more doors to finance their personal and business endeavors.
What Is an ITIN and How Can I Get It?
Foreigners, non-resident aliens, their dependents, and spouses can apply for an Individual Tax Identification Number (ITIN) as soon as they are ready to pay federal taxes. One can obtain an ITIN by submitting a Form W7 along with a proof of identification, which can be a country identification card, driver’s license, medical records, school records and other documents approved by the IRS. If applicants need assistance, they can apply with the assistance of agents authorized by the IRS. Applications are available online and the process takes four to six weeks to complete.
How Can an ITIN Help You Access Business Financing?
Building good personal credit history is crucial to obtain business financing. There are several factors that enable an ITIN to build a foreigner’s credit:
- The ITIN is accepted by many financial institutions to verify identification when granting loans or issuing credit cards. This slowly adds and builds up the borrower’s credit record and standing.
- There are three giant credit bureaus TransUnion, Experian and Equifax in the United States. These companies make the credit history and standings of individuals. When borrowers use their ITIN to get credit, the transaction gets reported to the credit bureaus and helps them collect information.
- The more successful transactions one does with their ITIN, the stronger their credit history becomes. This, in turn, helps one access credit to invest in a business.
- When using an ITIN for a transaction, one should use the same name and initials as any change will create a new identity record, and as a result, the new credit will not build one’s credit history. Also, ITIN holders should report any change of address to the IRS.
In addition to associating personal credit history with an ITIN, a business owner also needs to establish an Employer Identification Number (EIN) usually required when applying for business credit. To apply for an EIN, immigrants without a SSN can use an ITIN. In summary, the key steps to affordable business financing are: i) establish personal credit with ITIN (in lieu of SSN); (ii) apply for an EIN using an ITIN; and iii) establish/apply for business credit using your EIN with the right financing partner.
Places to apply for credit with an ITIN
- Furniture Stores
- Jewelry Stores
- A few credit cards such as Capital One
One cannot buy a house nor apply for student loans or any government loans with an ITIN.
Many foreign entrepreneurs think they cannot build their credit without being an American citizen or resident. Although they have fewer credit options, there is still a way for them to access U.S. credit markets that will help them invest in the future prosperity of their business.
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