How to Build Credit as a Newcomer to the UK
Every year, hundreds of thousands of people* are granted visas to come to the UK for work or study opportunities, to escape political instability, and to achieve greater financial security for themselves and their families. People from all over the world immigrate to the UK for a myriad of reasons. Yet, they are united by one large and shared problem: every time one of these people leaves their home country to begin a life in another, they leave their credit history behind, ‘stuck’ in the country they have left. Please familiarize yourself with answers to common credit-building questions below.
[Q&A] Building Credit in the U.K.
What does a lack of UK credit history mean for newcomers?
Credit history amounts to financial identity. Without their financial identities, newcomers routinely struggle to access the credit they need to settle themselves and their families into their new lives in the UK - whether it’s credit cards to buy the basics, loans to buy cars and mobile phones, or long-term rental accommodation or mortgages.
Even though a large proportion of these people are creditworthy, have amassed good credit scores in their previous countries, and are eager to be credit active, they are credit invisible and underserved in the new countries they call home. Without access to these people’s past credit histories, UK lenders often have no choice but to automatically decline their applications for standard forms of finance.
What are the options for newcomers seeking credit?
Nova Credit was established to solve this problem, creating the ability for lenders to tap into credit bureau information in multiple countries worldwide, accessing newcomers’ overseas credit histories to support credit applications in their new countries. To date, we’ve forged relationships with credit bureaus in more than 25 countries worldwide - including countries with the highest UK immigrant inflows*, such as India and Nigeria - and have unlocked user-permissioned access to more than 2 billion individual credit profiles. Newcomers seeking UK credit should ask potential lenders if they have integrated Nova Credit’s technology into their credit-checking processes. If so, their applications to those lenders are more likely to get a fair credit assessment.
Alternatively, another option that helps newcomers to the UK access the essential credit they need is a credit builder card - a credit card specifically designed to help those with poor or no credit history build it as they borrow.
How do credit builder cards work?
Credit builder cards are specially designed by lenders for people with minimal credit history or poor credit scores. These people may have low credit scores because they have had problems managing their credit in the past, or because they simply have a limited history of managing credit in the UK. Credit builder cards may be the best option for newcomers who regularly find that an absence of credit history on their UK file makes it very hard (or often, impossible) for lenders to lend to them.
How do credit builder cards differ from regular credit cards?
A key difference between credit builder cards and normal ones is that credit builder cards often have the widest and most accommodating eligibility criteria, making them a good entry-level option for those with low scores.
People who use credit builder cards, keep on top of their monthly repayments, and don’t exceed their credit limits tend to find their credit scores improve in 6 to 12 months.**
There are downsides to credit builder cards that are worth bearing in mind too. Because they have more lenient eligibility requirements, lenders that offer them often apply lower credit limits and higher interest rates to help them mitigate the risks associated with lending to those with lower credit scores. Ensuring that you pay off your credit card on time and regularly is key to managing good credit with a credit builder card.
Which credit builder cards can UK newcomers consider?
Several lenders in the UK offer newcomer-appropriate credit builder cards, appreciating that these customers won’t have local credit scores upon arrival in the country.
Aqua and Vanquis are UK financial services providers that specialise in helping individuals use credit cards to improve their credit scores. In addition to their competitive products, both providers offer expert customer support with hints and tips on building credit scores.
Aqua’s Classic credit card (representative 34.9% APR variable) permits initial credit limits of up to £1,200
Vanquis’s Credit Builder credit card (representative 34.5% APR variable) allows initial credit limits of up to £1,500
Many leading UK banks offer specific credit builder cards to customers, including newcomers to the country. Some options on the market include:
Barclay’s Forward Card (representative 33.9% APR variable based on a £1,200 credit limit)
TSB Classic Credit Card (representative 28.9% APR variable based on a £1,200 credit limit)
Tesco Bank Foundation Card (representative 29.9% APR variable based on a £1,200 credit limit)
*Based on Entry Clearance Data as of March 2023 from ONS
**Source: Finder.com