Credit history

This information is not intended as financial, tax, accounting, legal or other professional advice. You should consult a professional advisor when making financial, tax or accounting decisions.

You have heard this term many times before coming to Britain or during your stay here. In this guide, we'll cover:- what is a credit history and why is it needed;- what is desirable to do from the very beginning of arrival;- how to improve your credit score;- what can affect your credit score;- what mistakes should be avoided.

1. What is a credit history?

All UK banks, lenders (companies that lend you money in one form or another) and other organizations provide your information, which in the aggregate constitutes your “credit history”, to credit agencies (CRA - more on them later), which in turn, based on the information received, they give you your credit rating.Your credit score or record is a report showing your financial history. It shows whether you pay your bills on time, how much you have been entrusted with credit and how much of your total credit you are using, whether you have missed any payments and whether you have been convicted by the District Court (CCJ).Your credit score is calculated using a points system based on what is contained in your credit report, also known as your credit file, which reflects how you have managed your debts and bills in the past.If you have never borrowed money before, it will be difficult for lenders to assess the risk of lending to you, and your credit score will reflect this.

2. What information is in the credit history?

· Your first name, and former first/last name, if any.
· Your date of birth.
· Your current and previous addresses.
· Any loan or credit that you have, its type, opening date and current balance, if the loan has not yet been repaid.
· Every time your credit history has been checked in the past two years.
· Financial ties to someone with whom you have a shared account, such as a joint account or mortgage.

3. For whom credit history is important?

Sooner or later, every person who uses financial services in the UK will have a credit history. It is worth worrying about it if you plan to live in the UK for a long time.
If you allow for the possibility of staying in the country for a long time, it will not be superfluous to think about your credit history as soon as possible, as it changes rather slowly.
Banks and lenders look at your credit history to assess whether you are a responsible borrower and determine how much and under what terms they are willing to lend you. It is checked if you want to get a loan (loan or other financial product), for example, for: - buying a car (car finance)- buying a house on credit or mortgage- credit cards- loan- overdrafts (actually a loan on your regular bank card)- rental of real estate in the referencing process (we wrote about this process earlier in the rental guide)
The higher your credit rating, the better the conditions for repaying a credit or loan will be offered to you.
For example, if you want to buy a phone in installments, then you can be given it for 2 years without interest with a good credit rating.
Or you want a big wedding and are asking for a personal loan of £10,000. In this case, the bank will always check your credit history and assess their risks, whether you should be given this loan or not.
If your credit score is low – you will be denied funding or will be given extremely unfavorable conditions (a large percentage, etc.)
There is a saying in British financial circles that it is very expensive to be poor in this country. You are always at risk and you have the most unfavorable credit conditions.
If your credit score is high – You will always receive everything under favorable conditions, and banks will turn to you on the contrary and offer their credit card services and so on.

Who provides credit rating?

 The credit rating is provided by CRA agencies (credit reference agency). There are 3 main agencies in the UK, all of which are widely used by lenders, and one relatively new one:
Each of the agencies has its own scale for evaluating you:
IMPORTANT!Each CRA may differ and your credit score will be calculated differently..


Under the GDPR, each agency is required to give you a copy of your report when you directly request the agency, but there are many free services that provide you with the same data in a more accessible and complete format.
For example:
Experian - provide a free rating, which is updated once a month. Detailed report is free for the first month only.
MSE Credit Club - shows the full Experian report, but for free and without time limits.
CheckMyFile - the most comprehensive report that displays data from all four of the above agencies. This service is free for a month.
Credit Karma - displays TransUnion data.
Moneysupermarket - displays TransUnion data.
Clearscore (shows Equifax rankings and reports for free)
Some banks also allow their customers to check their credit rating and history in their personal account, but they have the same data as the services above.

5. What is Soft/Hard Search?

A credit check or credit search is when a company looks at your credit report to see your credit history. 
It is VERY IMPORTANT, that some of these searches will negatively affect your credit score!
They can use this information to understand how reliable a borrower you are. If you are looking to apply for a loan or other ways to get funding on loan, there are two different types of searches you can perform on your credit report - Soft Search and Hard Search. What is Soft Search?
Soft Search (also soft credit check) of credit rating occurs when you check your own credit report or when a lender checks to see if you qualify for certain products and interest rates.
The lender may need to review your financial history at a basic level so they can pre-approve any offers or show you what you can potentially qualify for.
Soft Search of credit rating leaves no visible marks on your credit file, but is recorded. This means that other creditors cannot see it. A soft credit check will not affect your credit score, but you will be able to see if anyone has checked your credit history.
If you are looking at your own credit report, it will also appear as a Soft Credit Search. You may find that in certain industries, employers will want to perform a credit check if you have recently applied to work with them. This will depend on the employer. What is Hard Search?
Hard Search (also hard credit check) - this is a lender's review of your full report with all the details, in order to assess your "creditworthiness" after you have applied for their loan product. It will be displayed on your report and will be visible to all other creditors, regardless of the outcome of the check. If you have been refused - in no case do not apply again, hoping for a mistake. It is unwished to have more than two hard searches on your report in the last 6 months, in the eyes of creditors this may indicate instability and problems with money. After refusal, you have only one attempt for six months, so always start by checking your eligibility using soft search. 

6. What are the first steps to building a credit history

Opening a bank account
Your possible first step is to open an account with one of the traditional banks known in the UK as High Street Banks. Many of them have very loyal conditions for opening an account for Ukrainians, which have never existed before.
Among the required documents may be: 
- your passport (BRP is usually not a mandatory document) - confirmation of the address (often banks agree to a letter from the sponsor confirming that you live there, or a letter from the NHS where you were assigned a number, etc.)
- Read all the details of the necessary documents and conditions in detail on the bank's website!
For more information on opening bank accounts, see the separate OporaBlog on this topic  Overdraft
Overdraft gives you the opportunity to borrow money in your current bank account, allowing you to have a negative bank balance. Your bank may charge an overdraft fee from your account (with the exception of the amount offered for free use, if such has been agreed). This payment is usually withdrawn once a day.
The overdraft loan amount will be reviewed according to your rating.
This is useful if you periodically have problems with cash flows. This is a short-term option, and in fact it should only be used as an emergency reserve to borrow a small amount of money for a short period.
 It is better to use credit cards, as you will be able to control them better and not go into the red “accidentally".
t will probably be quite difficult for you to get an overdraft in the first year of living in the UK, but you can periodically monitor the possibility of obtaining it on your bank's website. 
Example: link to the check on the website of HSBC bank  How does the availability and number of bank accounts affect the credit rating?
- The total age of your accounts in the UK. If you opened an account in 2022, and then 2 more accounts in 2023, and then decided to close the account that you opened in 2022 - this may (not always) negatively affect your credit rating, as the total age of your accounts will decrease- Availability of a bank account Make sure that your account is opened in a bank, and not in other financial institutions. Otherwise, with a high probability you will not have information about the availability of a bank account in your credit history
Contract for the provision of mobile communications
On arrival, most Ukrainians use a free card from Vodafone for 6 months.
At the end of this period, you can consider switching to a contract, even if it is monthly, and not long-term. Thus, the telephone operator will charge you on a monthly basis and provide this information to credit agencies. This can have a positive effect on building a credit history.
When switching to a contract with any other operator, you will be able to keep your phone number. Contact the mobile operator from which you plan to buy the plan, and they will help you.  Credit card
If you have used previous tools to improve your credit history, have lived in the UK for several months (usually from 3 to 6 months) and are now a happy owner of a credit rating, you can try to open a credit card.
In the credit history services, you can always view the cards that are available to you for FREE. This is called SOFT SEARCH and is described above in this guide.
Experts do not recommend applying for a credit card without first checking the probability of your application being satisfied. Each such application, even a successful one, will be displayed in your credit history and the more of them, the worse it will affect your rating, and it is impossible to fix it quickly.
If you are rejected and then you resubmit – your credit rating will decrease even more. The same thing will happen if you received a credit card, but decided that this was not enough for you and soon applied for another one.
Checking the probability by using a preliminary soft search is – FREE (most often). In the vast majority of cases, a Soft Search does not affect your credit rating, but before doing a Soft Search, experts recommend re-reading its terms. Where can I check the availability of a credit card?
There are a number of free services, for example
If you see that you have a good chance of getting a particular credit card (70% or higher), then you can consider applying for it.
If you did not do a SOFT SEARCH initially, submitted straightway and were refused – do not try to apply again at once. Experts recommend waiting a couple of months while trying to favorably influence your rating, then do a soft search and apply only for those credit cards that will be available to you.
Example of the "check if I am eligible" request


You must be prepared that during the first months of living in the UK, you will see that no credit cards are available to you. This is normal, you should wait and take other steps to build a credit history so that organizations can trust you. 




Credit card options● Credit cards linked to banks in the UK (for example, a credit card from HSBC, Santander, etc.)● Credit cards from certain providers that more readily give credit cards to people with limited or poor credit history (for example, Capital One, Vanquis, The Credit Thing and others).
When using these cards, it is important to remember that you should carefully study the conditions under which the cards are provided to you (probably a short grace period and high interest rates after the end of the grace period). This is your “payment” for the risk that banks and other financial institutions bear if you do not pay off the loan on time.
IMPORTANT! You should check with financial institutions whether they report to all CRA or not.
For example, you have a loan of £200 in one financial institution, but it reports only to Experian. In this case, if you request a credit card from a bank that verifies the data through TransUnion, your existing loan in a financial institution will not be displayed there and the bank will not take into account the data about your use of the loan when taking a decision whether to allocate their loan to you.

7. Advantages and risks of credit cards

The most important rule is: never use a loan if you are not able to repay it, if you do not want to have negative consequences in the future in the UK.  
When you get a loan, it has a positive effect on your rating. 
If you use the loan for more than 50% of your limit, it negatively affects your rating.
If you continue to use the loan and do not pay it in full, it has an extremely negative impact on your rating.  
If you completely stop making payments, most likely your lender will have the right to sue you, which, if the case is positive for the lender, will be reflected in your credit history in the form of a CCJ. With such a record, you will not be able to get either a loan or a job in certain areas for several years with a high probability. 
Even with a good rating, you should be careful when using a credit card. Experts advise using only a small part of your limit (up to 25%). The period for which no interest is accrued will end quickly and imperceptibly. 
Ideally, you should never use credit cards for their intended purpose, but you should get them if you want to build your rating, for example, when preparing to buy a house.   How to use a credit card correctly?
- You may NOT use a credit card AT ALL. The availability of a credit limit will be shown in your credit history tracking application and that's it. This is sufficient to build a positive credit history. It means that an existing lender has entrusted you with a loan and you do not have "shopoholism" and that you do not spend more than you are able to pay/
- If you have to use a credit card, it is better to use it only for a "quarter of the limit"
For example, if you have a credit limit of 700 pounds, you only use 150 pounds. What does it mean to "use the credit limit"
Banks and companies providing loans usually transfer data to the CRA once a month. You can use a loan on July 10, top up the card in full on July 15, and the bank will transfer the data to the CRA on July 13. It means that your credit rating will be lowered until the next reporting period. It's not a big deal, it will recover at the next reporting.
It is highly undesirable to "get into debt", namely, to use the card and not repay the loan amount until the end of the grace period. This will definitely lower your credit rating. If you repay in the same month, it's OK in the long run, even if your credit rating lowers for that month.
BUT if you failed to repay by the end of the month, then in no case you should use more than 70% of your credit limit. The recommended maximum is 25-40%. The number of credit cards
The credit history is affected by :
- excessive number of credit cards (the more – the worse, but it slightly affects the rating). If you have 10 credit cards and use all of them a little, it means that you have an excessive dependence on credit cards and you fall into the category of risky customers.
- your total amount of available credit limit (the more, the better, provided that the limit is used wisely). It means that banks trust you and you are not a "risky" customer.
In a few years, you will be able to reach such a status that banks will contact you and offer you to open a credit card with them, since they will understand that your risk is minimal and they do not lose anything, but acquire you as a client.
Direct debit payments
Overdue or missed payments can lower your rating, and may remain on your report for up to six years, so it is very important to pay bills on time. 
Consider setting up direct debit payment for your payments so that you don't accidentally miss one of them. 
In this case, the bills will be debited automatically from your account and you will be sure that you have not missed anything. Unpaid and ignored debt can lead to a CCJ (County Court Judgement), which can negatively affect your credit rating. Credit Score Booster
 If you want to raise your rating through regular direct debit payments (these may be any payments – from paying for swimming lessons for your child to paying utility bills), you can use a service called Credit Score Booster. In order to use it, you should check whether your bank or the CRA, in which you want to increase your credit rating, has it, and what payments they will consider, as well as the cost (there are both paid and free services).
The bank or agency will study your financial behavior and decide whether your debit card payments will affect your credit rating or not.

Residential address
You should not change your residential address often, this negatively affects your rating. Most often, you should wait for about six months at a new address until the credit rating rises again.

Electoral roll
You can register to participate in the voting at the link below. Ukrainians can vote only in Scotland and Wales, in local council elections.
- if you join the register of voters, it shows that you have a permanent address and reduces your financial instability. 

8. Means for improving a credit rating

There are a number of companies that, for example, simulate the payment of a loan. You consistently pay the same amount on direct debit every month for a year. At the end of this period, your money will be returned to you, since you had no debt, and the company will report to the agency that you made payments steadily and without problems.
Example of services : Loqbox, Credit Improver and others 
IMPORTANT! We advise you to always study the rules for using such services: cost, duration, refund of your payments, etc. before you actually start using the service.    Store card
Store card is a credit card that you can use only in one large chain or one group of stores, they often offer additional indulgences for their customers in the form of cumulative bonuses or discounts. Like a credit card, you can use a store card to buy things on credit and pay for them at the end of the month or in stages to split the cost. And, as with a credit card, you will be charged interest if you don't pay it off in full. The interest rate is usually even higher than on a credit card. A request for such a card will affect your rating in the same way as a request for a full credit card.
It is important to understand that store cards are exactly the same credit cards with credit obligations  
IMPORTANT! Very often it is written in the conditions that you must be a resident of the UK for at least 12 months.
Do NOT confuse a store card with credit cards with the store's logo or loyalty cards.
For example, Tesco, Sainsbury's, John Lewis and Marks & Spencer offer a credit card with the store's trademark that can be used anywhere (just like a bank credit card), not just in the named store - through the banks of these stores
Bonus cards such as Nectar or Tesco Clubcard allow you to accumulate points for purchases that you can use later to partially pay for the purchase or exchange them for goods and services, but do not provide credit. Store cards are not the same as reward cards or loyalty cards.
Examples of Store Cards
New Look

9. Credit rating changes

Depending on many factors and depending on how many of these factors you use, your credit rating will change over the course of a month.
Usually the fluctuations are insignificant, since all people have habits.
For example, here is the rating of a person in Experian who came to the UK a couple of months ago and used a loan from the Credit Thing for a couple of days. Initially, the rating was more than 800 points, but due to the use of a credit from the Credit Thing, the credit rating was significantly reduced to 760 points. It will rise again when the Credit Thing reports to Experian that the loan has been paid in full.


How are your debts shown: 


Here is the rating of the same person in Credit Karma (TransUnion). Since the Credit Thing does not transfer data to TransUnion, the “rating” is better here, but there is absolutely no mention of the availability of credit.


10. Errors in the Credit History

If you notice that there are errors in your credit history, you can correct them.
For example, you have registered for the Electoral Roll, but it is not yet displayed in your credit history. In this case, you should contact the CRA, where the data has not yet been updated, and send them an email from your Council confirming your registration.  
Or, you see that your report shows your old address when you were still living with sponsors under the Homes for Ukraine scheme, although you already moved a few months ago and updated your data in all your accounts. In this case, it is recommended to check the details of the bank account that provided incorrect information. If everything is correct there and more than a month has passed since the details were changed, you should contact the CRA directly and they will tell you how to fix it. 
Or, you see that there is a missed payment hanging on your history, although you do not remember this. In this case, you should contact the company that reported the missed payment and request an explanation.
It is advisable to always correct the errors that are in your history, because otherwise they can negatively affect your history for a very long period of time.

11. Problems when using loans

Usually the first step in solving a debt problem is to find the right help. Any help you receive should be professional, impartial and free of charge.
When you are looking for free help, you should be careful to make sure that the organization you choose is really free of charge. There are many commercial businesses that deceptively offer "free" advice and assistance, but actually charge for their services. The fee these companies charge for providing a debt management plan, for example, averages 17%, and for many people this can add around £4,000 to the cost of the plan. In addition, some companies encourage people to look for debt solutions that are not suitable for their specific debt problem.
Good advice and support are indeed available for free from debt charity organizations.
The support that debt charity organizations provide to people who have debts is professional, reliable and absolutely impartial. Charities, which we will talk about below, have helped a huge number of people in the UK overcome debt problems.
StepChange CitizensAdvice Christians Against Poverty The Debt Advice Foundation National Debtline

12. What should Ukrainians do right now to improve their credit history

● make sure that the bank account is opened in a bank;● register for the electoral roll, if you are in Scotland or Wales;● from time to time do a soft search on credit cards, see which ones may be available for you;● open 1-2 credit cards and use them very carefully. You don't have to use them at all in any way (remember that opening and/or using credit cards is a right, not an obligation);● at the end of free mobile communication, conclude a contract for the provision of mobile communication services;● try to pay any bills (subscriptions, sports, etc.) through direct debit and register for the credit booster service;● optionally, use the loqbox service or similar service.