How immigrants to the UK can build credit
By Michael Lloyd
If you're new to the UK, you may be surprised -- and disappointed -- to learn that your credit profile from your home country didn't come with you, no matter how impressive your score was before you moved. Familiarising yourself with the UK system can help make the task of building credit quicker and less painful.
You'll have to start from scratch, but if you had a decent score before, you should have the good habits needed to do the same here. Building credit typically works similarly across industrialized countries.
"It can certainly be a challenge to build a credit history in the UK from scratch, but not an insurmountable one if you go about it the right way," James Jones, head of consumer affairs at credit reference agency Experian said in response to emailed questions.
with non-credit products
The first thing you'll need is a bank account. Applying for one will involve some stringent identification checks, but if you have a job, a permanent UK address and the correct identification, the process shouldn't be a problem. On rare occasions, newcomers may be able to apply for an account with a bank they already have a relationship with, so check to see if the bank you used in your home country operates in the UK as well. For instance, Barclays operates in the US as well as the UK.
There are number of steps you can take to make yourself more attractive to lenders. Credit reference agencies use information from the electoral register to confirm consumers' identity, so if you're an EU or Commonwealth citizen, be sure to register. However, whether or not EU citizens will continue to be able to register to vote in the UK will depend on the outcome of Britain's Brexit negotiations, and it's likely that EU citizens will lose all voting rights. If you're not eligible to vote in the UK, you can provide proof of identity to the three major credit agencies -- Equifax, Experian and Callcredit -- as an alternative.
You should also make sure that all your utility bills are in your name, as some utility companies report payment information to reference agencies. Renters may consider checking out CreditLadder, a website that works with Experian to report details of your regular rent payments on your credit record and boost your credit history.
"These days, many firms routinely share payment information through the credit reference agencies, including about mobile phone contracts, gas and electricity accounts and even some domestic water accounts," Jones said. "This means it's probably easier than ever to build up a digital body of evidence that will help you quickly and easily be assessed and accepted for credit."
on to credit-building products
Once you've done all of this, it's time to apply for a starter credit product. It's unlikely that you'll immediately qualify for the best deals on the market, so your best bet is a credit building credit card aimed at those with no or poor credit profiles.
Be aware that, unlike in the US or Canada, there is no such thing as a secured credit card in the UK (that is, a card you secure with a deposit that becomes your credit limit). On the plus side, that means you can only get a regular credit card. On the down side, it means you'll only qualify for cards with high interest rates and low credit limits, at least at first.
Once your foot is in the door, it's a matter of biding your time. The only way to build your score and improve your access to more competitively-priced borrowing is to prove you're a good credit risk, and that's not something that happens overnight.
"Your overall task is to establish a strong footprint that provides evidence you're a reliable borrower," Jones said.
You'll need to pay all your bills on time and in full. If you get a credit-building card, try to charge a small amount and pay that balance off in full each month, too. Bonus: in addition to boosting your credit score, you avoid paying hefty interest this way.
You should find that your access to UK credit products will improve as your score goes up. You can keep an eye on your credit score by regularly checking your profile with one of the three major credit agencies. Callcredit's Noddle service allows you to do this for free, although you'll be able to access more detailed information by signing up for a paid credit monitoring service. Equifax and Experian also offer subscriptions that allow you to access your credit report.
"A healthier credit rating is becoming an increasingly important asset in modern life," said Jones. "A great credit score will not only help you get quick and easy access to credit you can afford to pay back, but can also open the door to the very best credit deals, helping your money go further."See related: Avoiding credit-builder card pitfalls, 5 steps to applying for cards you're likely to get, 7 small mistakes that can break your score
Published: 8 July 2016
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