If you’re planning on moving to the UK, or you’ve recently arrived here, you might be wondering how to access financial products like overdrafts, loans, credit cards or mortgages. But with so much information out there, it can be hard to know where to start.
Loqbox is here to make the financial side of your move as straightforward as possible. But before answering questions like, “Does my credit score move to the UK with me?” or “How can I buy a home after moving to the UK?”, we’d like to take a moment to say welcome.
Welcome to the UK credit system!
Loqbox can help you get settled
Moving to a new country is a big step. So whether you felt confident about the credit system in the place you used to call home, or you still had some things to learn, you might well find that some things are a bit different here.
We can help you to feel informed about the way that credit works in this country, and to ease your transition to life in the UK. We want you to feel confident in your knowledge of how the credit system works so that you have more time to focus on settling into your new home.
How does credit work in the UK?
When you’re new to the UK, it’s common to face some challenges accessing credit products like credit cards, loans and mortgages. (Even if you had a good history of managing credit responsibly in the past.)
That can be very frustrating. You might be wondering why this is happening to you, or asking yourself “How am I supposed to build my credit history if I can’t get credit?” So this blog is here to outline the basics and help you find out how you can work towards accessing credit in the UK.
What is the UK credit system?
In the UK, the process of applying for — and being given access to — credit is called the “credit system”. There are three main Credit Reference Agencies (CRAs): Equifax, Experian and TransUnion.
These organisations are responsible for collecting information about the way that people manage credit agreements, so that lenders can make informed decisions about whether to offer people credit and what rates to give them.
How do UK lenders decide whether or not to offer me credit?
When you apply for credit, lenders will ask you to provide details like your name, date of birth, income and current address. Most providers will then run a “credit check” to confirm your identity, learn more about your financial situation, and come to a decision about whether or not to offer you credit.
What are lenders looking for when they run a credit check?
When lenders run a credit check, they request a copy of your “credit history” from one or more of the CRAs. This is a record of how you’ve managed credit agreements — like credit cards, phone contracts or mortgages — along with contracts like utility bills. It also includes your address history, and whether or not you’re registered to vote.
Lenders use this information to confirm your identity and to make sure that you’re able to afford repayments. If you have a long history of making payments on time, your application is more likely to be approved. But having limited credit history could reduce your chances of accessing credit, or lead to lenders charging you a higher rate of interest.
Loqbox can help you boost your credit score with all three of the main Credit Reference Agencies, no hard credit check needed.
“Hard” and “soft” credit checks. What’s the difference?
There are two types of credit checks in the UK: hard checks and soft checks.
Soft searches allow lenders to view details on your credit report so that they can assess your creditworthiness, and decide whether you can afford their services. These do leave a note on your credit report, but they don’t harm your credit history or damage your creditworthiness. When you apply for credit, many lenders will run a hard credit check. This allows them to see similar information. But the difference is that hard checks can negatively affect your credit report.
If lenders see that your other credit applications have been rejected — or that you’ve been applying for multiple lines of credit in a short period — they might be concerned that you’re struggling financially. So try to plan ahead before applying for credit.
What is a credit score?
Your credit score is a number, generated by credit reference agencies, that’s there to give you an idea of how lenders might view you. These scores help you to understand how likely you are to be offered credit. The higher your score, the more confident you can be about applying for credit.
Each of the three credit reference agencies will give you a different credit score, which can seem a little confusing. But it’s important to check all three because lenders often check your credit history with more than one of the CRAs. You can find out more about the way your UK credit scores work in this blog post: What is a good credit score? The Good, The Bad and The Average.
How to check your credit score in the UK
Get your free credit report from Experian, Equifax and TransUnion
You can check your credit reports — and view your credit score — for free using the following services. Do this as often as you like — checking your credit report shouldn’t harm your credit score.
*All of these services are equally recommended. But for transparency, if you sign up for ClearScore using this link we do receive a little commission.
What if my credit report is blank?
If you’re new to the UK, you may find that your credit report is blank, meaning that when you check your credit report, your credit score might not be available. In other words, you might currently be “invisible” to the UK credit reference agencies, meaning that they don’t have any information about you in their system. This is a common problem for newcomers to the UK. But don’t worry — keep reading to find out how you can make yourself visible to the system.
Does my credit history transfer to the UK?
Unfortunately, if you haven’t yet used credit in the UK, lenders won’t be able to see anything when they request your credit history.
Your UK credit reports won’t include information about any credit agreements you had in your home country, so it’s likely your credit history will be blank. (If you’re wondering why that is, read the FAQs (Frequently Asked Questions) section at the end of this blog.
You may find that it helps to show lenders a copy of your credit report from your home country. It’s up to them whether or not to take it into account when assessing your application, but this might help to reassure them that you have a track record of making regular payments in the past.
What else is my credit history used for?
Credit scores in the UK aren’t just for loans, credit cards and mortgages. You might also be disappointed to find that some mobile phone, broadband, car finance and furniture finance providers might reject your application after doing a credit check. (The good news is that you should be able to find other providers that don’t check your credit report when you apply.)
6 ways to improve your chances of being offered credit in the UK
1. Register to vote, if you’re eligible
When you register to vote, your name and address will be added to the electoral register. The CRAs include electoral information on your credit report, so this helps lenders to identify you and shows them that you’re a resident in the UK.
You may already know that non-UK citizens aren’t able to vote in general elections, meaning the elections that decide which party runs the UK government. But did you know that you can still register to vote in local elections if you are an EU citizen living in the UK, or a qualifying Commonwealth citizen?
If you’re eligible, registering to vote could help you build your credit history and, if you choose to, have your voice heard in your local area. But if you’re unable to register to vote, there are still options available to you.
2. If you can’t register to vote, you can submit a notice of correction
A “notice of correction” is a short written statement you can ask the CRAs to add to your credit report. You can submit these to explain any personal situation that might affect your credit history — such as a health condition, short-term financial difficulties or the reason why you can’t currently register to vote.
Unfortunately, there’s no guarantee that lenders will take these notices into account when assessing your credit application. But some lenders do, so if you find yourself unable to register to vote for whatever reason, it could be a good option for you.
Notices of correction can be up to 200 words. It might help to explain why you can’t currently register to vote and to reassure lenders that you have proof of leave to remain, settled status, or an ongoing citizenship application. If you decide to do this, it’s worth sending the notice to each of the main credit reference agencies: Equifax, Experian and TransUnion.
3. Start building your credit history
Try to begin building your credit history as soon as possible after arriving in the UK. Here’s a handy list of where to start:
- Set up Direct Debits to pay your utility bills. This helps to prove your address and show that you’re able to make payments on time.
- Consider getting a SIM-only phone contract. Without a strong credit history, you’re unlikely to be offered a mobile phone on contract. But you might be able to get a SIM-only contract, which might help you build your credit history
- Make your rent count with Loqbox Rent. When you activate this feature of our full membership, we report your rent payments to Experian, building your credit history. (While this won’t affect your credit score, it can help to show lenders that you’re trustworthy.)
4. Open a bank account in the UK
Having no credit history can make this harder. But if you do enough digging, you are likely to find banks that will accept you. Most UK banks will ask you to provide proof of your address — usually an official document such as a council tax bill, a UK driving licence or a tenancy agreement.
If you don’t currently have an official document to prove your address, you may find that some banks are more flexible than others. Some online or app-based banks might accept your passport as proof of identification, while high street banks sometimes accept things like a letter from your employer or university.
If all else fails, some “New to the UK” bank accounts will allow you to apply for an account using your Biometric Residence Permit, in place of proof of address.
5. Boost your credit score with Loqbox
With full Loqbox membership, you’ll get access to a range of simple, proven ways to learn more about money and build your financial wellbeing for just £2.50 per week.
Our powerful credit-building tools can help you build your credit score by up to 300 points in the first three months. We believe that everyone deserves the opportunity to enjoy a happier, healthier relationship with money. So there’s no hard credit-check when you apply.
Improvements to your credit score are not guaranteed.
6. Avoid applying for large amounts of credit
We know this can be frustrating. But, even if you’re an experienced borrower, having a thin credit file in the UK will mean that lenders are unlikely to lend you large amounts of money. So it’s best not to apply for large amounts of credit — or make multiple applications — soon after moving to the UK, as being rejected could damage your credit score.
Instead, follow the tips in this blog post to build your credit score as quickly as possible. At Loqbox, we believe everyone deserves the opportunity to prove that they can handle credit responsibly. That’s why we won’t do a hard credit check when you become a Loqbox member.
FAQs about accessing credit when you’re new to the UK
Why doesn’t my credit report move to the UK with me?
The credit reference agencies — Experian, Equifax and TransUnion — don’t share information about UK residents with CRAs overseas, and vice versa. So, unfortunately, new UK residents have to begin building their credit history from scratch. (Just as UK residents do, if they decide to start a new life abroad.)
How can I get a mortgage as a new UK resident?
Even if you already have money saved for a house deposit, you will need to build up a history of using credit in the UK before you apply for a mortgage. Lenders need this information to be able to decide whether they feel that you can manage mortgage repayments responsibly.
Head to Loqbox Learn to read our guide on how to get a mortgage, find a home and buy a property in the UK.
Will I have a bad credit score as a recent immigrant?
It’s more likely that you’ll have no credit score. As mentioned above, your credit history won’t follow you to the UK from your home country, so it may take some time for you to become visible to the credit system.
The best thing you can do is to boost your credit score as soon as possible. We hope you find the tips in this blog post helpful, but if you’re looking for more, check out this blog post for more tips on building your credit score after moving to the UK.