When you first arrive in the UK, it’s not easy to access credit. This is because most lenders focus on your UK credit history when deciding whether to approve your application. If you have just arrived, you won’t have a credit history, which makes accessing loans harder than you would have hoped. In this post, we look at how credit works in the UK and give you some tips on how to build your credit score from scratch.
What credit score are you given when you arrive in the UK?
Experian clearly states that “credit scores can’t cross borders.” So, if you’re a new resident in the UK, you have to build your score from scratch. This means you will have a blank slate to work from. Traditionally, lenders want to know if you have a track record of repaying debt in the UK before approving your application. If you’re new to the country, you’re an unknown entity to lenders, which means they see you as a risk. However, you can retrieve a copy of your credit history from your home country, and you can share it with a UK lender. Although it won’t guarantee approval, it can help with your application. You should also be mindful of the fact that each credit agency scores in different ways, for instance:
Experian
- Very poor – 0-660
- Poor – 561 – 720
- Fair – 721 – 880
- Good – 881 – 960
- Excellent – 961 – 999
Equifax
- Very poor – 300-579
- Poor – 580 – 669
- Fair – 670 – 739
- Good – 740 – 799
- Excellent – 800 – 850
TransUnion
- Very poor – 0 – 550
- Poor – 561 – 565
- Fair – 566 – 603
- Good – 604 – 627
- Excellent – 628 – 710
How can new arrivals increase their credit scores?
New arrivals in the UK often ask – how to build a credit score? – but it’s not the easiest question to answer. In fact, borrowing without a credit score is a bit of a catch-22. However, there are some things you can do:
Open a bank account
The easiest way to show UK credit agencies that you can manage your money is by setting up a UK bank account. Just make sure you stay below the overdraft limit.
Use a credit card
If you show discipline with your spending and keep within your limits, using a credit card is another good way of showing credit agencies that you can be trusted with credit. Credit card companies are more accessible to new arrivals than personal lenders, so it’s a good first step to take if you’ve recently arrived in the UK.
Register to vote
When you settle in the UK, head to the government’s website and register to vote, as it’s one of the first things that credit agencies look for.
Apply for a mobile phone contract
Signing up for a mobile phone contract is a form of credit, and you can use it to your benefit. Providing you make regular payments, the details will be logged favourably on your credit report.
Make regular payments count
In most instances, everyday payments and rent bills don’t count towards your credit score, but you can change that. Using a service like Credit Ladder shares details of your everyday payments with the credit unions, which can help you build your credit score from scratch.
How long will it take to build a credit score from scratch?
Unfortunately, there’s not a simple answer to this question. This is because agencies don’t disclose how long it takes to build a credit score and how exactly scores are given. However, taking the above steps should help to improve your score, and you should see results within a few months. However, achieving a good credit score will likely take several years, as lenders want to make sure you can be trusted before giving you a chance.
Can you plan in advance?
There isn’t a great deal you can do before travelling to the UK to build your credit score. Most UK banks offer International accounts, but they typically have fees and minimum balances that equate to around £25,000, meaning they won’t be suitable for everyone. One of your first ports of call when arriving in the UK should be setting up a bank account, which you can do once you have proof of address.
Can you get a loan without a credit score?
In the UK, you can get a loan without a credit score. In fact, it’s an issue that Koyo Loans is acutely aware of, given their founder moved to the UK in 2016 and found credit difficult to come by. As a result, Koyo Loans uses Open Banking technology to securely view bank account data, which enables the company to verify affordability. This levels the playing field and allows new UK residents to access credit where they might previously have been denied.
What happens if you move to the UK for work?
If you’re moving to work in the UK, you will still have to start your credit score from scratch. Some employers offer their staff one-off payments to get started in the UK, but this doesn’t always materialise. If you need credit, applying for a conventional loan is likely to be difficult. But again, opting for an Open Banking lender like Koyo Loans is a good option, as they will see your income arriving in your bank account.
Recap: How to build credit score in the UK
While it’s certainly not easy to build credit score in the UK from scratch, it’s certainly not impossible. Following the tips introduced above and applying to an Open Banking lender like Koyo Loans will help you access credit when you’re new to the country and will help you build your credit history from a blank slate.
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