How to rebuild your credit report from scratch

Posted in 'Credit Reports' by Barry Stamp

05 January 2012

We are often asked how returning expat workers can build their credit rating quickly, in order to obtain a mortgage on their return to the UK. Often, expats will have been away from the UK for over six years and their credit report will be a complete blank sheet, and getting any form of credit can be a really daunting prospect - unless you know what to do.

To get things back on track and to establish a good credit report, the first thing that needs to be done is to register to vote – so that the basic building block of a credit report is put into place. By being registered on the Electoral Roll, a credit reference agency has a hook upon which it can hang any other information that comes its way.

To do this, you need to approach the Electoral Registration Office at your Local Authority – you can often do this online nowadays. It can take up to two months between asking to be listed on the electoral register and your records being sold to the credit reference agencies, and added to their own databases.

Once you know that this has been done, (by checking your credit report), you should apply for sub prime credit cards - Capital One, Granite, Aqua or Vanquis - where you will have the best (but not guaranteed) chance of success. You shouldn’t worry if you are declined – no record of any decline is recorded on your credit report.

If any of your applications are accepted, then you should use these cards regularly, and pay in full every month. The addition of 3 or 4 active good accounts to your credit report will bring your credit score right up.

Next, apply for a current account that routinely reports your account status to the credit reference agencies. We would suggest First Direct, which came out top for customer satisfaction in our recently published Banking and Credit Card Survey.

If successful with at least two sub prime cards, after about 6 months you should apply for a mainstream card, - i.e. any credit card with an APR of less than 20%. Our free Find a Lender service can help you find the right card. Again, not to worry at all about a potential decline, because your actions so far will add up to at least 5 credit searches on your credit report. Each credit search will re-validate residency at your address and will confirm your date of birth and as a result your credit score will improve on most credit scorecards, as you will then be regarded as typically 'credit active' .

It is also worth opening a contract mobile account and a home shopping account, so you’ll end up with a good spread of different types of credit. Crucially, you need to keep payments up on everything you apply for and get, and it's worth setting up direct debits to pay minimum payments just as an insurance to make sure you don't end up with a black mark on your credit report, just by forgetting to pay on time.

Within about 12 months, your efforts should have been rewarded with a detailed and clean credit report. You will then be able to apply confidently for a mortgage. Mortgage applications are usually assessed subjectively against lending policy. This means things like how much deposit you can raise, the loan-to-value ratio (the lower the better) and checking affordability from your income - these together are much more important to a mortgage lender than the contents of your credit report The credit check on a mortgage application is usually simply to check for detrimental information. The mortgage lender will be looking to check that there are no CCJs, no defaults and also use the credit report to confirm your residency.

This is where the electoral roll information and the monthly updates from your credit card lenders come into play, if you have built up your credit report as outlined.

Timing is everything with applications for credit when you are rebuilding your credit report, and it’s important to monitor how your credit rating is improving with the improvements being made. By subscribing to our Multi Agency Credit Report you can do just that. It’s free to trial the service for the first 30- days and then costs a very affordable £9.99 per month for the most comprehensive credit report available in the UK, containing more than twice the information than any other credit report, and includes free identity theft protection and credit scores at no extra cost.

It’s worth investing time and a small amount of money to rebuild your credit standing so that you can soon get the credit you deserve.