Expats: How to Build Your Credit Score in the UK

This post looks at how US expats – and other newcomers – can establish their financial credibility (and build their credit score) in the UK.

When you move to the UK, your credit score from your home country doesn’t follow you. Indeed, you’re actually considered a blank slate, and will need to rebuild your financial credibility from scratch. This is not something that can be achieved overnight. But, there are some definite quick wins to be had. So, in this post, we’ll cover a number of different ways that newcomers can start building credit in the UK.

“Imagine you are lending someone money. On the surface, they may appear trustworthy. But if you don’t have much info about them, then you’d want to know more, just to be sure”.

Martin Lewis, Money Saving Expert (2020)

All of these steps are ultimately designed to do one of 4 things: to prove your identity, your address, your reliability, and your stability. Together, they help creditors to estimate the risk of lending to you.

How credit scoring works in the UK

There is no universal credit score, like FICO in the US. Instead you’ll notice that the three main agencies all produce three completely different scores. But, these are just proxy scores for your reference. It’s so that you can see how you are doing relative to others. In actuality, lenders who say that they are doing a ‘credit check’ on you don’t use any of those agency scores. They don’t even see the numbers! Lenders see the data used to calculate the numbers. So, for example, a lender will see: the average age of your bank accounts; they’ll see whether you have any missed payments; and whether you are repaying just the minimums on your credit cards. Or, if you are able to repay above each required minimum.

They take all of this information from the credit reference agencies, they add in the information you have given them during your credit application e.g. your salary. Then the lender will apply their own secret algorithm to all of that data, arriving at an internal credit score for you, that you are never told. So, each lender is interpreting your data in their own individual way. This is why it’s possible to be denied a loan by one bank, and then to be approved by another bank after giving them the exact same information.

It’s a little frustrating to not know how a creditor is judging your application and determining your risk level. But, the scores that you can access via credit reference agencies give you a general idea of how lenders see you, when calculating their company-specific internal scoring.

What is a good score?

I’ve marked in green the scores each of the credit reference agencies consider to be relatively ‘good’. So, you have an idea of what you are aiming for.

What can build your UK credit score?

UK bank account

One of the first things you should do when you arrive in the UK, is to open a UK bank account. I’ve explained how new expats can easily do this, in another post. The older your bank accounts are, the more ‘trust’ you build up with potential creditors. This trust will be reflected in your credit score. It will take more than a year for this to have an effect.

Overdraft facility – You can arrange to have an overdraft facility added to your new UK bank account. This means that when you have no money at all in your account, your bank will still let you continue spending – up to the pre-agreed overdraft limit. If you can show that you stay within the agreed limits and pay back the overdraft each month, this will help you to build good credit. It’s also an alternative approach for those who would prefer not to have a credit card.

Electoral roll

If you are eligible to vote in the UK, make sure that you register for the electoral roll. As part of the registration process, you have to give a number of personal details, such as your home address. So, this is one way that creditors confirm that you are who you say you are, and that you live where you say you live. This is why it’s very important to keep your details up-to-date by re-registering each time you move home. Being on the electoral roll is a relatively quick way of boosting your credit score, and you should see the positive impact within a few months of being added. A word of warning, though, people who move frequently within a short space of time will see their credit score go down! Constant moves imply a lack of stability that makes creditors less willing to lend to you.

Whilst it’s always worth checking your eligibility, if you are a US or Canadian citizen, it’s unlikely that you’ll be allowed to join the electoral roll. Most people from outside Ireland, the EU and the Commonwealth are indeed ineligible to join.

Ineligible to vote in the UK?

If you are not eligible to vote in the UK, then you can ask the UK credit agencies – Equifax, Experian and Transunion – to add a ‘Notice of Correction’ to your credit report. In up to 200 words, you should explain why you have not registered for the electoral roll.

“Your notice must be factually correct, suitable for publication, and cannot damage someone else’s reputation”

ClearScore

You should also send the credit reference agencies proof of your UK residency i.e. a tenancy agreement, utility bills etc. Ask the agencies to add a note confirming they have seen the original documents. This verification should work in your favour when lenders review your credit information during their internal scoring process.

Utility bills

When you move into your new UK home, you should put the utility bills in your name, if possible. Or, if you are sharing accommodation, you can have your name added to some of the bills jointly with another tenant. Set up automatic direct debit payments to ensure it is never made late – or missed entirely. These regular, timely payments will work to positively boost your credit score over time. It will take at least three months before the effects of these regular payments are felt.

Mobile phone contract

You’ll probably want to take advantage of the cost savings of using a local sim card once you move to the UK. By taking out a mobile phone contract in your name and paying it monthly by direct debit you will positively impact your credit score. Mobile phone contracts can vary in length from 24 months, to 12 months to a rolling monthly contract. The monthly cost will mainly depend on how much data you want to include in your package.

I have chosen to use the mobile operator, Three UK. The main reason being that it offers unlimited data, even whilst tethering other devices (which is still quite rare in the UK). But, if your credit score is still too low to get such a contract, consider signing up with GiffGaff. You won’t need a credit check. But, your regular GiffGaff phone payments will help to improve your credit score in the UK.

Rent payments

Yes, paying your rent on time could actually improve your credit score in the UK! It’s similar to paying your mobile phone bill on time. Launched in 2016, the Rental Exchange Initiative (REI) is still relatively new. So, if you ask your landlord about it, and they just stare at you blankly, that would be why 😅. When you make your rent payment on time, a record of that on-time payment is recorded in your Experian credit file. This service only updates in your Experian records. But, since it’s free, it’s still worth registering to take part.

If your renting privately and your landlord is part of the scheme, just ask them to include your payment details. If they are still staring at you blankly, then you can choose to self-report instead.

Another option, is to use CreditLadder, rather than the REI. Each time you self-report your rental payments your credit reports on BOTH Experian and Equifax can be updated for a £5 monthly fee. Or, you can choose to have the payment recorded by ONE of the agencies, for free.

As long as you keep up with your rent payments, these schemes are an easy way to improve your credit score in the UK.

Credit cards

I am not a fan of credit cards at all. They make it easy to spend money you don’t have. Instead of feeling the necessary discomfort of spending your hard saved money on a large purchase. That ‘payment pain’ is put off. You kick the proverbial can down the road for your future self to deal with. Whilst present you can live it up.

But, for completeness, credit cards are another way of improving your credit score when used responsibly. Use your card for small purchases like petrol, coffees or lunches and then be sure to pay it off IN FULL each month. This shows that you are responsible with credit and you don’t just pay the minimum each month.

The first one or two cards you get will likely give you an horrendous APR rate – you don’t have a credit history after all. So lenders are taking all the risk! But, again, if the payments are on-time, and meet the expected amount you will soon see your low credit card limit rise, and better interest rate offers will open up to you. You can find an appropriate credit card using a comparison website like, Money Supermarket: You may find your card application easier if you can prove that you have been full-time employed for at least three months.

A few other points to note, Do NOT withdraw cash using your credit cards. This suggests that you are desperate/experiencing financial difficulty. So, your credit score could be negatively affected.

Close credit accounts you don’t need

Back in my London years, before I developed my dislike of credit cards, I met with an HSBC staff member to talk through financial savings products. He told me that in order to improve my credit score I should close my Capital One credit card. It was indeed the one with the highest interest rate. But, he said that for whatever reason, he had noticed that customers who closed cards like that saw an increase in their credit scores not long after. Don’t know how true that is. Or, if that’s still the case. But, once I was able to get cheaper credit, I did indeed close my Capital One account. If you have any nuclear option credit cards, the type that are the only things available to people who have bad or no credit, I would suggest closing them once you have other options.

Certainly, the credit reference agencies themselves advise that we close down accounts that we no longer use/need. These dormant accounts can actually count against you and your credit score.

Store cards

Many high street retailers (that’s main street retailers, for you Americans 😉) offer store cards, that function like credit cards, for their specific shop. They often allow customers discounts on purchases made using the store card. This is another line of credit that will cost you dearly in terms of your interest rate. It allows you the option of paying for clothing and consumer goods in installments. But, given the cost of that credit try to use this sparingly, and pay it off entirely each month. Such behaviour should increase your credit score in under a year.

Repeated credit applications

Each time you apply for something like a credit card, a loan or perhaps car finance, a hard credit check is done and this appears in your credit report. Repeated credit applications can really hurt your credit score. I mean, would you lend money to someone who you knew had already been turned down by 10 people before asking you?

Too many applications in a three to six month period and creditors become naturally suspicious. Make yourself less of a risk to lenders by keeping credit applications to a minimum.

Available credit

You should aim to use 25% of your available credit, or less. So if you have a credit card with a £200 limit, you should try not to exceed a balance of £50 at any one time. That might seem quite low. But, max out your lines of credit each month and it will look like you are struggling to keep your head above water. And, that impression will weaken your credit score in turn.

Credit report checks

Since you moved to the UK, have you actually checked your credit report? You need to do so regularly. Not only does it allow you to keep in touch with your credit score, but it also helps you to spot irregularities. Perhaps there’s a mistake on your report that is still affecting your ability to take certain actions, like getting a mortgage at a decent rate. Or, perhaps you’ve been the victim of identity theft. Once you spot odd things on your report – like credit accounts you didn’t open – you need to deal with it immediately. There are some paid services that offer a free trial. But, I personally use ClearScore. It’s free… forever and gets its data from Equifax, one of the big three credit reference agencies.

Other options include going directly to: Experian, Equifax or TransUnion. You probably recognise some of these companies from your home country. But, there’s effectively a Chinese wall between your credit report at home (e.g. the US) and your credit report in the UK. One does not affect the other.

Any financial missteps will be kept on your credit file for up to six years.

Financial associations

Are you getting married to someone who has a terrible credit score in the UK? You may want to hold off on opening that joint bank account then. This financial association could have a major impact on your budding UK credit score. Infact, if you are joining forces with anyone to take out credit you should exercise caution. So, paying for home insurance monthly with your flatmate could be enough to create a financial association. Not a problem if they have good credit. But, it’s something to be aware of. You can ask the sales team of the product whether a joint account would make a financial association that would affect your credit.

Regular income

Your income amount won’t actually make a difference to your credit reports from the main credit reference agencies. However, you will almost certainly be asked about your income when making a credit application. And, lenders will absolutely take it into account when putting together their own internal credit scoring. So, that’s why I have included this variable on the list of things that can improve your credit score in the UK.

When you have regular income being paid into your UK bank account, you are in effect saying: “Hey, I have regular money coming in. So, if I am extended credit, I will be able to pay it back without trouble”.

Even if your long-term plan is to work for yourself, it will stand you in good stead to be able to show stable employment for a year, or longer. Full-time stable employment for three years is what some banks look for when assessing you for a mortgage. Whilst a year of employment should show enough financial stability for you to get a car lease.

Final thoughts

The debts you’ve incurred in your home country may follow you. But, your credit score does not – even though the UK’s main credit reference agencies also operate in other countries, like the US and Canada.

Infact, the biggest difference that expats might notice when building up a new credit score in the UK, is that there is no universal scoring system here – like FICO scores. Instead the scores you see when you view your credit report are entirely for YOUR benefit. So, that you can get a better understanding of how lenders MIGHT view the risk of lending to you. In reality creditors actually only see the information on which the score is based. Using that information, and their own secret sauce algorithm lenders make their own unique assessment about whether to lend to you. That means that one lender might reject you, whilst another lender might roll out the red carpet with the same information.

Given this, I’d argue that in the UK, credit scores are not the be-all and end-all they seem to be in the US. It’s important if you want to get a competitively-priced mortgage. But, as long as you can find a guarantor, a lower credit score need not bar you from renting, for example. The key is to be honest and up-front with the lender/landlord, to explain any mitigating circumstances. And, if all else fails, to offer to pay a much larger sum up-front than they have asked for… in cash.

I’m interested to hear your experiences about relocating to the UK from abroad. Was your non-existent UK credit score ever an issue? How long did it take you to boost your scores? Let me know in the comments below.

Disclaimer

I hope that you have found this useful. But, remember that this isn’t financial advice and doesn’t take into account your personal circumstances. It’s presented for informational purposes only. Speak with a financial advisor or other qualified professional if you do need advice. Please see my disclosure policy for additional details.