UK Credit History

CREDIT HISTORY IN THE UK

INFORMATION ON CREDIT HISTORY IN THE UK Some banks may offer credit card facilities when you first open an account in the UK and may not refer to a credit scoring agency. However if you are applying for additional credit or loans within the UK the following advice may be useful to you. To be accepted for an additional credit card, personal loan, mortgage, overdraft or most other forms of credit in the UK, you will need to have a good credit history and – in some cases – credit score . What is a credit score? A credit score is a number or category that reflects how good or bad a credit risk a particular lender thinks you are. Normally the higher the number the better the ‘credit risk’ you are. Your credit score can determine: + Whether a lender is willing to lend you money + How much money you can borrow, and + What interest rate you will be charged Your credit score will be based partly on your credit history, which is a record of how much you’ve borrowed in the past and how you have managed your finances. You need to build a credit history before you attempt to borrow money within the UK. This is particularly important if you have moved to the UK from another country. Who works out your credit score? There is no single, definitive credit score that exists for you, it is worked out by individual lenders following an application. For example, two different banks might score you in different ways depending on their policies on lending. However, when you apply for credit they will check with one or more of the three main credit reference agencies in the UK: + Experian + Equifax + Callcredit These agencies each compile credit information about individuals in the UK. Before you apply for credit for the first time, you might want to check your credit report is up to date and correct by using one of these companies. HOW TO START BUILDING A CREDIT HISTORY There are some simple steps you can take to start building a credit history. 1. Open and Manage a Bank Account Setting up and using a UK current account will help build your credit history if you run it responsibly (e.g. making sure you have enough money in your account to cover your payments each month) because it will demonstrate that you can have a responsible, ongoing relationship with a bank.

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2. Pay Your Bills by Direct Debit Set up some regular Direct Debit payments to pay bills such as your utilities, your home or mobile phone or any services and facilities you will be paying for on a regular basis. Not only will this give you a better credit rating, but you’ll probably get a discount for paying by Direct Debit and it will make managing your finances a little simpler. 3. Don’t Miss Payments Make sure you pay all your bills on time and ensure that you have enough money in your account to make the payment. Missed or late payments will count against you. If the lender has to go to court to get the money, then a county court judgment (decree in Scotland) will severely affect your ability to get credit and it will remain on your file for six years. 4. Manage Your Credit Cards If you have a credit card via your bank, ensure that you try and clear the credit used each month or remain under two thirds of the credit limit given to you. This demonstrates that you are not reliant on credit and can manage your finances well. If you have any credit cards that have not been used, cancel them. It reduces your credit risk as well as the risk of credit card fraud. 5. Get on the electoral register (if applicable) If eligible, being on the electoral register means that a lender can confirm the address you have provided as part of any application process. If you are not eligible to vote in UK and EU elections you will not be able to register on the electoral roll however, you should add a note to your credit report explaining why you are not on the electoral roll as this will be seen by any underwriters assessing your application. You can find out more about registering at the About My Vote website What impacts your credit rating? It is best to avoid those things that can have a negative impact on your credit rating in the first place. Here are some of the things that may affect it. + High levels of existing debt - banks and credit card companies may be nervous about lending you more if you’re already over stretched. + Missing or making late payments - on anything from your mortgage, credit card, personal loan, gas or electricity bills will stay on your credit file for six years. + If you get a county court judgment / CCJ - (decree in Scotland) for unpaid bills + Applying for lots of credit at once - when you apply for credit it shows on your credit report so it’s better to stagger applications. If you just want to compare rates, find out whether the lender can register a ‘quotation search’ on your credit report instead of a ‘credit application search’. + Open credit cards accounts that you never use - lenders will look at how much credit is available to you, not just how much you’re actually using. + Mistakes on your credit report - if something on your credit report is incorrect or doesn’t apply to you contact the credit reference agency immediately to have this investigated and removed. + Not being on the electoral register - this is used by lenders to verify that you are who you say you are. + Moving a lot - lenders feel more comfortable if they see evidence that you have lived at one address for some time.

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+ Being tied into any joint form of credit - such as bank accounts, loans or mortgages with someone who a poor credit history, known as ‘financial association’, as this will affect your ability to gain credit. HOW TO IMPROVE YOUR CREDIT RATING IN THE LONGER TERM + If you’ve had debts, you need to show lenders that you can borrow responsibly. In time, this will improve your credit score. + Make your repayments on time and pay off your accounts early if you can. This shows that you’re a sensible borrower. + Use a credit-builder prepaid card - If you have a poor credit history then there are credit-builder credit cards you can apply for. - Be aware that the interest rates charged are much higher than standard credit cards. Typically, you’ll be paying over 30% in interest a year so you must make sure you pay off any balance in full each month. Otherwise you’ll get into debt that you may struggle to get out of and harm your credit score even further. Credit limits on these types of cards are typically low. + Avoid expensive credit repair companies - You may see adverts from firms that claim to repair your credit rating. Most simply negotiate with any companies or provide advise such as lieing to credit reference agencies. For further advice and guidance on your personal finances in the UK it is strongly advised that you seek independent financial advise from an authorized person or body. Your bank can offer you advise and guidance as can an independent financial advisor. You should always ensure that the person providing this advise is FCA (Financial Conduct Authority) regulated to be assured of the quality of advise you are being given. USEFUL WESBITES Financial Conduct Authority http://www.fca.org.uk/

Bank of England – Prudential regulation Authority http://www.bankofengland.co.uk/Pages/home.aspx Money Savings Expert http://www.moneysavingexpert.com/ The Money Advice Service www.moneyadviceservice.org.uk Citizens Advice Bureau www.citizensadvice.org.uk Unbiased https://www.unbiased.co.uk/ Financial Advice https://www.financialadvice.co.uk/ Financial Advisor http://www.financial-advisor.co.uk/

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