The information provided in this article is provided as is and shall not be considered to be legal or professional advice.  There is no warranty of any kind regarding the accuracy of the information and if you decides to use the information in anyway, then you are doing it at your own risk.  By reading on or by using the information provided on this page, you implied that you agreed with the terms in this paragraph.

0.1  Why this article is written ?

This article is written because I came from abroad to study in UK, I discovered that it was virtually impossible for me to obtain any credit at all.  There were numerous occasions where I got really frustrated of being refused credit and I hope that this article will be able to help those who are in the same situation as I was.

0.2   Copyright

This article is Copyrighted by MyCoupon.freeuk.com and any unauthorized duplication is strictly prohibited.  I will use the search engines to track down unauthorized duplication of this page and will take the appropriate action to protect my right.

0.3  Audience

This article is mainly to help those who are credit worthy such as student who are just graduating but are unable to obtain credits due to flaws in the credit scoring system.  This article is not intended to help those who have genuine bad credit history even though there are several semi-legal or illegal ways of getting around the system.

1.  What is Credit Scoring System

If you came across this page, you probably have known what credit scoring is. Therefore, I will keep it brief.  Credit scoring is basically a system that evaluates the credit worthiness of a person by take into account its financial stability, age, income etc and past loan repayment performance.

2.  Is this a fair system ?

The answer is it depends.  In some obvious cases, it does give clear indication about one's credit unworthiness.  In most other cases, it has been used a the sole tool to judge one's credit worthiness and often, the outcome is far from fair.  
In many situation, it is shameful that even when the appropriate evidence (such as prove of address) can be provided, the lender is still unwilling to overrule the decision made by the computer scoring software.   This is definitely not fair, and I think it is sad that human have to followe computer blindly without being able to use his/her discretion.  Typical companies who believe computer decisions should not be overruled by human are one of the prominent internet bank which offers 0% credit card and a direct insurance/credit card/mortgage company who advertises frequently on the television.
Further, a single black mark such as one's failure to repay a £1 utility bill due to whatever reason will be registered as a 3 or 4 or 5 status (sometimes just as 3+) (debt overdue extendedly) and be barred from access to credit facilities. To make the matter worse, I have a friend who was repeatedly refused credit because my friend was associated with a person of different surname at the same address who failed to pay a £10 telephone bills.  When the association was removed, credit was granted.

3.  Parties involved

4 parties are involved during a credit scoring process - the consumer, the lender, the company that provides the credit scoring software and the credit reference agency.
The credit agency does not play a role in the decision making / scoring process but if the data they provided is PARTIAL/Incomplete/erroneous, the outcome  WILL be affected.

Two credit reference agencies who operate in UK are Experian and Equifax.  While they shared some common data such as electoral roll, county court judgements, each of them often only contains part of one's credit history.  This is because some lenders use Equifax and some lenders use Experian and one's good credit records in Equifax database will not be visible to a lender who uses Experian database.  I feel that this is unfair and discriminatory as this is comparable to a case where one has obtained a degree from Oxford University and is now studying in Cambridge for a second degree but the employer refuse to acknowledge everything that one has achieved in Oxford University.  

As a general rule, utility and mobile phone companies use Equifax and Banks/Credit Card/Loan companies use Experian.  Also, I suspect that organisations that use Equifax are more flexible compared to lenders that use Experian.

4.  Get Around The Game

The only way to get around the game is to borrow and start small.  But before you try, please ensure that you have the discipline to use the borrowed money to improve your credit rating and not to spend them all!

4.1 Step 1

The first step of the game is to ask for your credit report by writhing to 

Equifax
Credit File Advice Centre 
PO Box 3001 
Glasgow 
G81 2DT 

Please include : 

• £2 Cheque or Money Order payable to Equifax. 
• Full Name: including Title, Forename, 2nd Initial, Surname (and Maiden Name if appropriate).
• Present Address: including Town, County, Postcode and Date Moved In. 
• Previous Address if you have lived at any other UK addresses within the last 6 years please list each address giving Town, County, Postcode and Date Moved In.
• See their website for most updated information.
  

And

Experian Ltd
Consumer Help Service
PO Box 8000
NOTTINGHAM
NG1 5GX
Tel: 0870 241 6212

And enclosed £2 payment the information as described above.

This will cost you £4.00 in total.

This will tell you how your credit record looks like and will also tell you if your bank is NOT doing you a favour.  Many credit card and current accounts that you acquired when you were student are NOT reported to the credit reference agencies and therefore no matter how well maintained these accounts, they will never be known by the other lenders !  If appropriate, you can ask your bank for an upgrade account that WILL report your good behavior to the credit reference agencies. You WANT your good behaviour to be known !

17/01/2002 : I received question from visitors regarding offshore credit cards.  "Secreacy" is usually advertised as one of the benefit of such cards and most of these cards are "secure credit card". ( Secure credit card means the credit card where you place deposit and will then be provided with a credit limit which is less or equal to your deposit).  Therefore, these lenders most probably will not use UK credit reference agency and owning them will not help your credit directly.(*).   

Further, often upfront fee is required, transactions are conducted in USD  and there is no guarantee that the issuer/lender will still be there before you spend up to the deposited amount ! Therefore, they are very expensive cards to own !

(*)   It might help you if the credit card help you to obtain some services such a mobile phone that then allows your payment behaviour of the service to be recoded by Equifax/Experian.  Phones4U direct shop do offer phones to credit card holders without carrying out credit check. (Personally, I am not so satisfy with their after sales service....).  Many in-store appliance loans will also require you to put down your credit card number.

4.2   Step 2

This step is not strictly necessary, but a new internet service called CheckMyfile will provide you with a FREE CREDIT SCORE report based on the data you provided such as age, income etc.  The scoring is indicative as it does not actually access Experian/Equifax database but would give you an idea as to where you stand.  FREE Registration is required. 
(They do provide premium services that required payment, however, I do not know how useful they are).

4.3  Step 3

Ok, now it is time to deliberately build up a credit history.  There are 4 ways to start :

A.  Borrow from HFC Bank via Dixons/Iceland/Comet/Curry's 0% interest free option.  These credits are fairly easy to get as one of the purpose HFC bank extends this credit is to acquire new customer and the amount is usually small !  Dixons is usually the best place to start as Dixons managers are usually able to exercise discretion. Look for item that you wanted to buy which cost about £100-£200 and offer a large amount of deposit (25 - 50%).  This will make it a relatively safe deal to the retailer and the lender.  Taking out their  insurance protection is not necessary and I would recommend you NOT to take it as they are expensive.  You should settle the loans after about 3-4 months for two reasons : 

• To avoid the high interest rate that kicks in after the expiry of the interest free period.
• Only settled loans count strongly towards your credit rating, therefore unsettled loans will help less in your credit rating. 

B.   Get a credit card that reports your repayment history to the credit reference agency.  This is a very important as credit card repayment history is often used to gauge one's credit repayment performance. In US, there are many so-called secure credit card, i.e. credit card which is guaranteed by your deposit which allows people to have a credit card and to build up their credit history. 

Unfortunately, this is not the case in UK and capital one classic credit card is THE ONLY credit card that is issued to everyone who applies regardless of credit history (although the interest rate will vary !) 

Several off shore banks do offer secured credit card to UK resident but I consider the cost too expensive.  This is because, firstly, all transactions get processed in US Dollar which means one will lose out in foreign exchange rate.  Secondly, there is usually an application fee of $50-$200.

Therefore, if you haven't got a credit card, then you can try the CapitalOne guaranteed approval Credit Card.  This card is not particularly attractive but since the annual fee is refundable, it will be a good start to create some sort of credit records.  CapitalOne is a bank that diligently reports your repayment history to the credit reference agencies.  Therefore, if you maintain your credit card properly over 6-12 months, you will look a lot more credit worthy then when you started ! 

(If you have a credit card which was acquired while you were in university, there is a good chance that your bank does not report your repayment history to the credit reference agencies. If this is the case, then you should try to get a credit card from a bank that WILL report your good repayment performance to the credit reference agency).

It is very simple way to maintain the Associate or Capital One card, just apply for the card and pay £1.00 more than the total amount when you received your FIRST statement and  keep the card under your bed and after several months you will look a lot more credit worthy.  The reason to pay £1.00 extra is to keep your account in credit (i.e. they owe you money instead of you owe them) because zero-balance account will not caused credit report or statements to be generated. By keeping the balance at £1.00 credit, you will continue to receive your credit card statement every month and Capital One will continue to report your "good credit performance" to the credit reference agencies. By doing this, you are building up a good credit history by investing just £1 !

p/s : The Associate is offering credit card to people without credit history too.  Details to follow.
Also, Halifax PLC seems to be very keen at new businesses so it should be possible to start up a saving/current account with them and the apply for their credit card several months down the line and get approved.

C.  Your third option is to get a small personal loan which is guaranteed by a relative or friend or a deposit.  This can be a quick way of building up your credit. 

Getting a relative who have long relationship with a bank to guarantee your loan and you should be able to get a loan fairly easily.  Try to take out about 3 loans of £500 each at the same time, then make 3 timely repayment on each loan over a 3 month period and then settled all the loans.  This would cost you about £45 over a 3 month period at an interest rate of 12%. Please make sure you take out loans that allow you to settle them early without penalty. 
(Remember NOT to spend the money, but to keep them separately and used the solely to settle the loan!)

The other thing I am going to mention here is a trick of Credit Building exercise. Firstly, go to a high street bank and open a saving account with a pass book and deposit £500.00.  After 2 weeks, take out a loan of £500 from the bank by putting down your saving account as collateral.  Then, take the £500 you have just borrowed and open another saving account and do the same.  Halifax is usually quite understanding and reasonable when extending credit and will diligently report all your good credit performance to the credit reference agency (Experian).  This exercise will cost you about £45 over a 3 month period at an interest rate of 12%.  Please make sure that you only take out loans that allow you to settle them early without penalty.

4.4   After you have deliberately borrow and return money a few times as suggested in the article and make sure that the lender has reported your good performance to the Credit Reference Agency,  you should now be armed with good credit records. It is really that simple.

5.   Good luck and please check back this page as I update them.  And please be reminded again that for legal reasons, the information provided in this page is provided as is and should not be considered as professional advice.  You should always seek professional advice before committing yourself to any financial transaction. If you use any information provided on this website, you understand that you are using it at your own risk.

5.1  Things that you Should Not do is to knowingly provide FALSE information.  Sometimes you may be able to get away by omitting addresses but if you get caught, then you will find it virtually impossible to get any credit at all. This is because lenders have accessed to a central fraud prevention database called the CIFAS database. (http://www.cifas.org.uk).  As far as I know, at least NationWide Building Society provides Experian with address move information and big discrepancies in the move information may get you into trouble.

The entry looks like :  01-01-2002, at address 6 months, move from ....