Top 5 Ways to Build Your Credit History from Scratch in the UK

Top 5 Ways to Build Your Credit History from Scratch in the UK

Maybe you just moved to the United Kingdom and need to establish a credit history, or, you may have had issues in the past with the UK credit rating industry and are trying to rebuild your credit score?

Regardless of the reason, there are several options to begin building (or rebuilding) your UK credit score from zero. Credit scores are a measure of creditworthiness used by most lenders, UK or otherwise, and can either save consumers thousands of pounds in interest payments or cost them thousands. Applicants with low credit scores are assumed to pose a greater risk of default and are thereby charged a higher lending price. By first checking your current credit score via your credit report (for free), you can discover exactly where you stand. While it may feel like an intimidating process, building up a personal credit score in the UK from scratch is actually easier than people think. Here are four simple ways to make a positive impact on your credit score:

  1. Register to vote – This is such a simple way to build credit in the UK yet it is often overlooked. Registering to vote in public elections is especially important if you are a new UK resident. Registering on the electoral roll will provide reliable identity verification in the eyes of a lender and will go a long way to beginning a successful credit history. If you are an established UK resident but unregistered to vote, the process is free and simple. Click here for more details.
  2. Get a bank account with an overdraft option – Establishing a UK bank account is fairly straightforward and strongly encouraged when building or rebuilding one’s credit score. The goal with a bank account is to successfully maintain transactions, a positive balance, and avoid overdrafts. One easy way to avoid overdrawing your account asking the bank to attach a small line of credit to your current or savings account. If ever you write a check over your available balance, a safety net is in place to help you avoid any negative consequences.
  3. Get a mobile phone – Choosing a SIM only mobile phone plan can lead to a favorable payment history. While many mobile phone users opt for a “pay-as-you-go” plan, if a person can obtain a contract mobile phone service, it will send a stronger message of payment responsibility to any future lender. Pay your mobile phone balance in full and on time.
  4. Get a secured credit card – While some builder credit cards have a higher annual percentage rate (APR) attached to them, if a person pays his or her balance in full each month that interest rate is never applied. After a period of time (and proper payments) your bank will transition you into a traditional credit card. Throughout this process, the credit card issuer will report your positive payment activities to the credit bureaus (in the UK this is Experian, Equifax and Call Credit).

While keeping track of these steps may seem complicated, the good news is that consumers can receive alerts and updates about their progress. Any reputable credit reporting agency offers excellent resources to track credit score improvement for a reasonable fee. Small, positive credit steps can often lead to large, credit reporting effects within just a matter of months. When actionable steps are broken down, the process seems far more attainable!  

Got a question about building a credit history from zero? Leave a comment below or ask a question in our forum by registering now.

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