When moving to the UK, learning how to manage your finances can be confusing and frustrating. Just accessing basic financial services such as a credit card can be difficult if you don’t have the right UK paperwork.
Below are some tips on how to kickstart your credit history journey so you can maximise your chances of being approved for a credit card in the UK.
There are a few ways you can build your creditworthiness as a new UK resident and also some pitfalls to avoid. These are:
- Register to vote - Ensure you’re registered on the electoral roll at your current address. Being registered can enhance creditworthiness and make it easier for lenders to verify your identity and address.
- Open a bank account - If you open a UK bank account and maintain it responsibly, you’ll build a positive banking relationship that can contribute to your creditworthiness and may increase your chances of being approved for a credit card, particularly within that specific bank.
- Start with a Basic or Secured Credit Card - These are designed for individuals with limited or no credit history. But be very careful in your choice of card. They typically have lower credit limits, very high interest rates and frequently monthly fees. They may also require a security deposit. Like regular credit cards, they are not really designed to help you build a good credit score.
- Apply for a starter credit builder loan - These appear to help individuals with limited credit history establish a positive credit record. But they are not normal loans and you should evaluate them with caution. You won’t usually be able to find these at mainstream banks however, providers such as LOQBOX and Credito offer these services. You may find their fees are high or you may have to open other accounts with their partner companies.
- Consider a joint account or authorised user status - Previously we have discussed how severing old financial connections can improve your credit score if the person with whom you are associated has a poor credit score. This can also be used conversely. If you have a trusted family member or partner with good credit history, you may consider becoming a joint account holder or an authorised user on their credit card. This allows you to benefit from their established credit history and contribute to your own.
- Use alternative credit data - Some lenders may consider alternative credit data like rental payment history or utility bill payments as a factor in your creditworthiness. Using services that report these payments to credit bureaus may increase the likelihood of being approved for a credit card as a new UK citizen.
- Practice responsible financial behaviour - This might seem obvious, but it is the best way to build a good credit history. If you make all your bill payments on time, including rent, utilities and phone bills, this demonstrates good credit management. If you do this in conjunction with point 6, you’ll likely be accepted.
- Monitor your credit report - It’s important to keep an eye on your credit report in case of inaccuracies that may impact your creditworthiness. It could be the minor and seemingly unrelated details that make the difference. You can receive a free annual credit report from agencies such as Experian, Equifax, and TransUnion.
Remember, building credit is a gradual process so you’ll need to be patient and consistent in your financial habits . It’s important to borrow within your means and avoid accumulating debt that could deduct from your creditworthiness and potentially increase your debt-to-income ratio . By exhibiting responsible credit behaviour over time , you can increase your eligibility for credit cards and other financial products in the UK.
It can be a long road, but there’s an easy way to kickstart this journey. Your trusted bank account is a sensible place to start building your credit score. By using a BuildMyCreditScore debit card connected to that account, you can build your credit score simply, one small purchase at a time.