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The beginner’s guide to credit: Part 1 - Building your UK credit score

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If you’ve recently arrived in the UK or you’re planning to move here soon, you’ll most likely be working your way through a load of paperwork - sorting out your home, applying for jobs, visa applications, and so on.

Understanding how to access credit in your new country probably isn’t top of your ‘to do’ list, but learning about how UK credit works now might help you if you want a loan in the future.

Credit history when moving to the UK – what you need to know:

First up, it’s a good idea to get an understanding of your credit score. This is one of the main things lenders use to decide if they will lend to you. A good credit score has the potential to open doors to different financial products like bank accounts, debit cards, credit cards and loans. All these can help with essential things like housing, utilities and transport.

In the UK your credit score is generated by three credit reference agencies: Equifax, Experian or TransUnion. Among other things, they look at how much credit you have access to and whether you’re making regular payments on bills or loans.

Credit reference agencies collect information locally. This means that your credit score, history and report cannot transfer across countries so, your score probably won’t move with you.

If you have debts abroad, they can remain active. The chances of existing debt following you to the UK will depend on who you owe money to, and in some cases HM Revenue & Customs (HMRC) does have the power to reclaim unpaid debts from abroad.

(Re)Building your credit score

When you move to a new country, you might not have had the opportunity to prove you’re a reliable borrower or climb the credit ladder and could have a very limited credit history.

This means you might find it hard (or expensive) to borrow money because you could be considered ‘high risk’ by lenders. Credit reference agencies will need more information about you and your financial habits before lenders are likely to approve your loan application.

To improve or build your score, you want to show lenders you’re responsible and can make regular payments and this means seeking out opportunities to borrow, repay and create a positive credit history. Here are some ideas that can help to improve your credit score and, over time, may make you more likely to be approved for a loan:

  • After finding a home in the UK, make sure you are on the electoral register. You can find eligibility policies on the UK Governments official website.
  • If possible, put all the household bills under your name to show that you regularly pay bills on time.
  • Open a UK bank account and use this as your main account to receive salary, transfer money and pay for utilities.
  • Apply for a National Insurance number and card.
  • A job that pays regularly, each week or month, will not only provide a regular income, but will show lenders that you can afford to pay back your loan.
  • A common reason why people are refused a loan is due to mistakes on their credit report, so it’s a good idea to review your report and check everything is accurate. You can request a free copy of your report at Experian, Equifax or Transunion.

Now that you have some insight into the UK credit system, and how you may be able to build your credit history, in Part II we’ll dive into tips and tricks on how you can help to maintain your well-earned credit score in the future.

Having a bad credit history is not the same as being in financial difficulty. If you think you are in financial difficulty or are finding it difficult to pay your bills on time you should seek an alternative solution. To get debt advice information, we advise seeking independent advice from an impartial service like Citizens Advice or a qualified Financial Advisor.

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