Last updated:
January 2, 2024
Written by
Claire Fürst

Building Credit in the UK: Essential Guide for New Residents

Congratulations on recently moving to the United Kingdom!

Moving to the UK brings many new experiences and challenges, which can include managing finances. For new residents, one of the first obstacles to overcome is building a credit score here. 

Whether it’s for getting a loan, renting a flat, or even signing up for a mobile phone contract, being visible with the credit reference agencies is important. However, newcomers often find this difficult and find themselves having to start from scratch because credit histories from other countries don’t transfer to the UK.

That’s where Ozoomi can help you! With this guide, we hope to provide some top insights and practical steps to navigate and succeed in the UK's credit system.

Understanding Credit in the UK

Let’s start by asking what is a credit score? In the UK, credit scores are numbers which represent a person's credit file. It shows the ‘creditworthiness’ of an individual - so a bit like a school report, but for how you have managed your money in the past.

Lenders like banks and credit card companies, use credit scores to evaluate the potential risk posed by lending money to people. The lower someone’s credit score is, the more ‘risky’ they appear to financial lenders. This is often why you hear about people wanting to ‘boost’ or ‘increase’ their credit score.

The three main Credit Reference Agencies (CRAs) in the UK are Experian, Equifax, and TransUnion. These agencies gather information about your borrowing and repayment habits to create your credit score.

The Unique Challenges for New Residents

As a new resident, you face the unique challenge of creating a credit history in a completely new financial environment. Your previous financial conduct, no matter how responsible, doesn't carry over across borders, and makes you  ‘credit invisible’ in the UK. This lack of credit history can negatively affect your ability to access essential financial products and services and deny you opportunity.

Key First Steps to Build Your Credit Score

Finding Stability

Finding and maintaining a long-term residence in the UK can significantly impact your credit history. Lenders favour stability, so having a fixed address improves your credibility.

Setting Up Financial Basics

Opening a UK bank account is a crucial first step. Showing responsible financial behaviour through your bank account is a key factor in building your credit history. It is also great to set up utility bills in your name and ensure timely payments are made to boost your credit score.

Engaging with Credit

Starting with smaller credit agreements, like a mobile phone contract, can be a good first move. Similarly, applying for a credit builder credit card, or a credit builder loan (luckily for you, we have a 0% interest credit builder loan right here at Ozoomi with no credit search necessary!) can help you start building your credit history. Remember, the key is to make repayments on time to demonstrate financial responsibility.

Next Steps to Boost Your Credit

Registering on the Electoral Roll

Registering on the electoral roll in your local area can significantly boost your credit score. It's proof of address and identity, which is always a factor that lenders will check. 

Unfortunately, there are restrictions on who can register to vote - but don’t worry - if you are not eligible, there are other ways to boost your score. 

  • For more information, head over to the GOV.UK Register to Vote page, which says signing up should take no more than five minutes. 

Use Financial Technology

Embracing modern financial technologies and apps can aid in building your credit. Many fintech solutions offer innovative ways to manage finances and can reflect positively on your credit report.

Use Credit Responsibly

It's essential to use any form of credit responsibly. This means avoiding maxing out credit cards, paying bills on time, and not taking on more debt than you can handle.

  • A top tip is to use no more than 25% of your credit limit (e.g., if you have a credit limit of £1,000, try not to use more than £250). This is called a credit utilisation ratio. If you are often maxing out your limits, this will make lenders worried that you cannot manage money properly, so will be less likely to lend you more. 

Overcoming Mistakes and Setbacks

Mistakes happen, but it's important to address them quickly. Regularly monitoring your credit report for errors and disputing any inaccuracies is crucial. 

  • It is important to understand the steps you need to take to correct any negative marks on your credit history that have been reported incorrectly, like missed payments. This usually involves contacting the creditor (lender) to dispute the mistake and if it’s resolved, checking with the three credit reference agencies to ensure that the negative impact has been successfully removed. 

Understanding Different Types of Credit

Understanding various credit types, such as personal loans, credit cards, and secured loans, is important. Each type affects your credit score differently, and knowing how to manage them can benefit your credit history.

The Long-Term Impact of Your Credit Score

Your credit score has a big impact on your financial wellness in the UK. It can deny you opportunities in many ways as it affects your eligibility for mobile contracts, mortgages, insurance rates, and even some job opportunities. Building a solid credit history is not just about accessing immediate financial products and services, but about ensuring long-term financial wellness and stability.

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