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One of the main issues affecting people who have recently moved to the UK is difficulties in getting credit cards, loans or even a mobile phone contract due to their lack of credit history. HSBC has become the first British financial institution to check international credit history when newcomers to the UK are applying for credit cards. This could be of particular benefit in the future to people who are applying for a credit report check as part of standard pre-employment checking.

How It Works

HSBC UK credit card applicants, whether new or existing customers, can now choose whether they want to use their international credit history when applying online. Currently, the HSBC service covers 12 countries, including Australia, Brazil, Canada, Spain, Switzerland, and the United States. HSBC has partnered with an international credit referencing agency and is hoping to extend the service to other countries in the future. Opting in for international checks requires your consent for the sharing of this information. Applicants will still be asked for supporting documents such as identification and income details. More information will be needed from anyone looking to access their international credit record, such as their home country ID number or passport number, overseas addresses, and details of when you moved to the UK.

Impact on Credit Score

The impact on your credit score of allowing a UK bank to access international credit history with HSBC on your credit will vary depending on which country you are dealing with. If you are accessing credit history from Australia, India, Spain, or Switzerland for example, this is classed as a soft search which does not affect your credit score. However, credit history from Nigeria or the United States is recorded as a hard search which could affect your credit score. As this system is still very new, it is likely that the system will be standardised over time as more companies start looking at international records.

Alternatives To International Credit History for UK New Arrivals

If you are new to the UK and need access to credit, another option is to look at credit cards marketed for individuals with bad credit. These cards are designed for people who find it difficult to get loans or other credit because of a poor credit score or lack of credit history. These cards typically offer lower limits, higher interest rates, and fewer benefits, but they can help you build your UK credit rating if used responsibly by ensuring that the bill is paid off in full every month. If you are eligible to vote, then getting onto the electoral roll at your British address can also help improve your credit score, as can being listed on utility bills for gas, electricity, or internet. Building credit does take time, and it can take a year or more for scores to improve. Anyone can sign up for one of the apps to manage credit score to track how things are improving over time.

In the UK there are three major credit reference agencies which manage our credit report and credit score. But what exactly is a credit score? Is it the same as a credit report? What qualifies as a good or bad credit score? How do lenders use credit scores when making decisions? And what role does a credit score or credit report have in the pre-employment identity verification checks which some employers use?

What is My Credit Score

To understand credit scores, we have to start with the credit report. Your credit report is just a financial record of your past and present activities. Credit card providers, banks, utility companies or mobile phone providers give information about you to credit reference agencies on a monthly basis. This information includes things like whether you have applied to take out any new loans, how regularly you are paying off the debt you already have, whether they are taking you to court over unpaid debts and so on. This is your credit record. The agencies will then take the information on your report and generate a score. Each agency does this slightly differently, so it’s less important to pay attention to the exact number. Instead, look at the grading you are given, which ranges from “very poor” to “excellent”.

Lenders consider both your credit score and the details on a credit report when deciding whether to give you credit.

Other Factors Affecting Credit Score

1. Affordability – many people believe that the higher your salary, the higher your credit score. That’s not strictly speaking the case. Lenders are more interested in how much money you have left over after all your essentials have been paid for. If money is tight – whatever your salary – lenders are going to worry that you will not be able to afford payments.
2. Credit cards – lenders are interested in what percentage of your available credit you are using. If you have one card and spend up to the limit each month, this is viewed negatively even if you pay it off. Having a few cards with available credit which you are not using ensures you are seen as a better risk.
3. Bill payments – your gas and electricity suppliers or mobile phone company will all share information with the credit reference agencies about whether you are paying on time. Late payments will go against you.
4. Loyalty – credit agencies give higher scores to people who have been with the same bank or building society for years. If you change your current account, then your credit score might dip until a few months’ payments have been made from the new account.
5. Frequent application – applying for multiple loans or credit cards in a short period will negatively affect a credit score as lenders may perceive you as desperate.
6. Association – if you have a joint bank account or mortgage with someone else, any debt which they are in can affect your credit score too.
7. Online gambling – credit reports might have information about where you spend your money as well as how much you spend. Payments to multiple online gambling sites are a huge red flag for lenders.

If you have recently applied for a job which involves credit checking, identity verification and other pre-employment checks, it can be a confusing time. Many of us are confused about our credit score or credit report, and concerned about what might be disclosed to our potential employer. Worrying about your credit score can be understandable but ignoring it won’t make it go away. A bad credit score may have significant consequences, but improving it is within your control too.

Take Control and Find Your Credit Score

The three main credit referencing agencies in the UK are Experian, Equifax, and TransUnion. Each of these three credit bureaus are legally obligated to provide you with your credit report upon request, free of charge. This basic credit report typically just contains the basic details of name, address, and any finance outstanding. More detailed reports are available, and many websites or apps offer a free trial period (typically 14 days) before requiring payment. This will show your credit score number.

Poor Credit Score

There are lots of reasons why you might have a poor credit score. Some of these are:

• Out-of-date information, such as an old address you have moved from.
• Not being registered to vote at your current address.
• Limited or no credit history, if you have recently moved to the UK or have just turned 18.
• Excessive credit – someone who regularly reaches or exceeds the credit card limit.
• Lots of loan or credit applications in a short time period.
• Missing payments or defaulting on loans.
• Bankruptcy or CCJs (county court judgements).

A growing issue is people who are “credit invisible”, estimated at around 5 million in the UK by Experian. These are people who just don’t have enough information on their credit record to allow the credit agencies to form an opinion about them.

Improving Your Credit Score

A poor credit score is not permanent and can be improved with time, commitment, and responsible financial management. If you can boost your credit score, this gives you a wider choice of loan products, and potentially better interest rates too. There are some very simple steps anyone can take to help improve their credit score:

• Register to vote on the electoral roll at your address.
• Regularly check your credit report for errors and ask the credit reference agency to fix any mistakes you find.
• Get your name on household bills, for things like gas, water, or cable TV.
• Pay your bills on time, and in full. Use reminders or set up direct debits if you struggle to do this.
• Pay more than the minimum payments on your credit cards, ideally paying the full balance every month, or as much as you can.
• Keep checking your credit report and flag up anything suspicious right away – identity theft is a growing problem and can seriously affect your credit score.

Having a bad credit score doesn’t mean you can’t get credit at all. It may just mean you have a restricted pool of credit options and might pay a bit more in interest until your score improves.

There’s often a lot of fearmongering about credit history and how much it will impact on your everyday life and future financial choices. This is especially the case when you are facing a credit check as part of pre-employment checking for a new job. Understanding the process and what employers and lenders are looking for should help deal with some of the myths around credit scoring.

Check Your Credit Report

The first step is always registering for a copy of your personal credit report. You can do this online for free through credit reference agencies like Experian and Equifax or via third-party providers like Clearscore and TotallyMoney. Once you’re signed up, you will receive updated reports and scores in by email, allowing you keep your eye out for any unexpected changes. When you get your credit report for the first time, look closely at all of the personal and financial details. These reports may not always be correct, so it’s essential to ensure the information on file about you is correct. Some items you’ll find in your report are:

• Personal information: Your name, date of birth, and address, including past addresses within the last six years.
• Financial associations, such as joint mortgages or shared loans you have in joint names with other people.
• Whether or not you are listed on the electoral roll as a voter at your address – if you are not, this will decrease your credit score dramatically.
• Details of your borrowing, including outstanding balances and payment history for accounts like mortgages, credit cards, store cards, personal loans, and overdrafts.
• Details about any County Court Judgments (CCJs), bankruptcies, and Individual Voluntary Arrangements (IVAs).

What Doesn’t Appear on A Credit Report – The Myths

Many people are unsure about what will appear on a credit report. These do not include any details about:

• Savings accounts.
• Salary, wages or who your employer is.
• Your criminal record.
• Parking tickets or driving licence points.
• Arrears on your council tax.
• Details of any payment holidays or Covid related payment freezes you’ve taken on mortgage or other loans.
• Student loans – whether you are in default or not.

There are other persistent myths about credit reports which are also unfounded. The biggest of these is probably that banks or other financial institutions have a “blacklist” of people who are blocked from all credit. Each lender will have their own rules about who to offer credit to. Similarly, institutions will not blacklist or bar whole streets, postcodes, or towns from getting credit. The only thing which will stop you from getting credit is your own credit history and record. If you have defaulted on credit agreements in the past or been consistently late in paying, financial lenders are going to be concerned that you will be a bad risk. Improve your credit record by keeping an eye on your credit report and correct any errors which you find on it. It might take time, but ensuring you always pay bills on time will eventually be reflected on your credit score.

Very few of us can afford to stroll into a dealer and pay for a new car with cash. Finance agreements are commonplace, and lenders always do a credit check before deciding on your car finance application. The credit report plays a significant role in their decision-making process, along with other checks such as verifying your identity and address. Credit reports give them lots of details about your credit history, allowing them to decide whether you are a good risk for finance – or not.

How Credit Scores Work

Every person in the UK aged 18 and above has credit score number representing their creditworthiness. Experian, Equifax, and TransUnion are the three main credit reference agencies used by lenders. While several companies offer credit scoring apps or websites, they rely on data from one of the three major agencies. Your credit score reflects your credit rating, usually on a scale of up to 1,000, with a higher score indicating better creditworthiness.

Checking Your Credit Score

The main credit scoring agencies —Equifax, Experian, and TransUnion—must provide you with a free copy of your credit report if you go direct to them. However, you can also opt for paid services from them which give you more information or more detailed access. You can also use third-party websites or apps like ClearScore and Credit Karma, as these use information taking directly from one of the main reference agencies.
By law, the main credit references must give you a copy of your credit report free of charge. They are allowed to charge for extra services such as credit improvement tips, but you don’t have to sign up for these services if you don’t want to.

Applying for Car Finance and Your Credit Score

When you apply for any form of finance, including a car loan, the lender runs a credit check. If you’re using one of those services marketed as finding out whether you’re likely to be accepted, this is a “soft check,” which doesn’t leave a mark on your credit. However, if you make a firm application for finance, the lender performs a “hard check,” which appears on your credit report. Making one application won’t go against you. Multiple applications may suggest desperation for credit, making you appear high-risk to lenders.

Factors Affecting Car Finance Credit Score

There are many factors which influence your credit score, whether for car finance or other loans. These include your borrowing history, late payments, financial difficulties, on-time repayments, and your credit-to-debt ratio. Being on the electoral register at your current address is one of the easiest things you can do to improve your credit record. Lenders will also want to see that you are managing your money responsibly by paying regularly every month, preferably by direct debit. Pay off any longstanding debts and deal with any county court judgements (CCJs). If your problem is that you have no credit history at all and therefore no information for the agency to make a judgement on, it can be useful to get a credit card with a low balance and pay it off in full each month.

In the job hunt process, putting together a stellar CV and preparing for interviews are undeniably important steps. However, employers are increasingly using additional measures like pre-employment credit checks as part of the hiring process. These checks are aimed at verifying your identity, checking the accuracy of your application details, and evaluating your suitability for the role. Employers might also check your social media profiles, verify your academic qualifications, contact your references, or run a criminal record check. One of the least understood of these pre-employment checks is the credit check.

What is a Credit Check?

A credit check looks into your financial history. These are typically used by financial institutions to when applying for loans but can also be used by employers. Most employers who use these checks are also operating in the financial services market, or employing people in roles where they have lots of access to cash.

Employers doing credit checks can only access data from public databases, such as CCJs and bankruptcies. They cannot access private information like your credit card history or financial associates. Additionally, they cannot view your credit score.

Why Do Employers Do Credit Checks?

Credit checks were once associated with financial sector positions, they have now become a routine part of recruitment across various industries. Employers generally conduct credit checks for two primary reasons. Firstly, they want to make sure you are who you say you are by cross-referencing the details you provided with those in your credit report. Secondly, they want to try to identify any patterns of financial mismanagement. This is done not only in roles giving access to money or accounts, but also many employers feel that a solid credit report or score shows that the employee acts responsibly and is organised.

Timing of Credit Checks

Employers choose when to do the credit check during the recruitment process. Most companies will do all the pre-employment checks after an offer has been made, and typically the offer will say “subject to pre-employment checking”. Employers must tell you what checks they are doing and get your permission. This sort of pre-employment credit check will not affect your credit score.

What the Employer Sees

Credit reports aren’t secret, and you have the right to request a copy of yours from any of the major credit referencing companies in the UK. There are websites or apps like ClearScore or Credit Karma which you can sign up for and both access your current report and track how it changes over time. Once you have your report, check it for accuracy as the agencies have an obligation to put right any mistakes. Deal with any old debt which you discover on your file and take advice from the apps and websites about what you can do to improve your credit score if it is not as good as it could be. Being able to explain to an employer the steps you are taking to improve matters can only go in your favour.

An Adverse Credit Check is a specific type of pre-employment screening that employers might choose to carry out on current workers or potential employees. Its purpose is to uncover any significant adverse credit history. These checks are important in the pre-employment screening process, especially in roles where employees will have access to cash, accounts, or valuable assets. Adverse Credit Checks can help deal with management concerns about staff fraud or dishonesty. An employee with a history of financial vulnerability or who is regularly spending way beyond their means may be more susceptible to bribery, or temptation of taking money from customers’ accounts.

What is Adverse Credit?

“Adverse credit” means looking at any history of late payments or non-payment in an individual’s credit report. Adverse credit information includes:

1. Individual Voluntary Arrangements (IVAs) – A formal agreement between an individual and their creditors. These are taken out when someone has a higher level of debt and struggles to pay it all back.
2. County Court Judgements (CCJs) – these are issued when a customer is taken to court by a company over an unpaid debt, or a payment issue which has been ongoing for several months or years.
3. Bankruptcy – this is the most serious form of adverse credit. Bankruptcy only happens when someone is in such serious financial difficult that the court steps in and takes charge of their finances for them.

Adverse Credit and Credit Score

An Adverse Credit Check is purely a pre-employment financial assessment is not concerned with the applicant’s credit score. The generated report is different to the credit report which is used by banks or credit card issuers when making lending decisions. It’s important to remember that employers are really not interested in when you took out a mobile phone contract and how much you are paying each month on your rent or mortgage. These adverse credit checks are really just looking for the most serious financial issues which might lead to concerns over your ability and suitability for the job you are under consideration for. Any good employer will be able to talk you through the process, explaining exactly what will be done, and what information they will be using to make their decision.

Getting An Adverse Credit Check

Most Adverse Credit Checks are completed within five minutes, so as a prospective employee you won’t be kept waiting for months for someone to make a decision. The employer can complete the checks online and will receive the results of the check by email or as a .pdf document which they can download. Often, employers will outsource all of their pre-employment checks to an external company. Remember also that the credit check is just part of the information which the employer will use to make their final choice of who to employ. If you are concerned that your credit check might go against you, then seek advice from a debt charity about what steps you can take to make yourself appear a better prospect as an employee.

Your credit score plays a really important role in your day-to-day finances. Your credit record affects your ability to access credit, including loans and credit cards, as well as the interest rates you’ll be charged. A strong credit score can save you a substantial amount of money, as you’ll be able to access the products and rates reserved for people who have proved that they are a good risk. If you have been turned down for credit, or are applying for a position which involves identity verification or a credit check, it’s a good idea to find out what is on your credit file, and work out what you can do to make your financial situation look more attractive.

Check Your Credit Report

The first step in improving your credit score is obtaining a copy of your credit report. You’re entitled to ask for one free report every year from each of the major credit agencies. (Equifax, Experian, and TransUnion). Scan each report for mistakes, such as accounts which don’t belong to you, or late payments that were actually made on time. If you notice any errors, lodge a dispute with the credit agency.

Payment History

Your payment history is the single most important factor affecting your credit score. Experts estimate that this alone accounts for 35% of your total score. Late payments stay on your credit report for up to seven years. Consider setting up automatic direct debit payments or use reminder apps on your phone to make sure you never miss a deadline.

Pay off Your Credit Cards

Your credit utilisation ratio looks at the amount of credit you’ve used compared to your credit limit. A high ratio can negatively impact your credit score, as it appears you are overly dependent on credit. Try to keep your ratio below 30% by either paying off balances or increasing your credit limits.

Don’t Close Dormant Accounts

Surprisingly, closing a credit card account can have negative effects on your credit score. It reduces your available credit and can increase the percentage of credit you are using, as discussed above. If you have an inactive credit card, it’s wise to keep it and use it every month or so to keep the account active.

Build Your Credit History

Many young people who are just starting out have a limited credit history. There is just not enough information about them for the agencies to come up with a solid credit score. Think about getting a credit card with a very low balance, which you then pay off every month in full. This will help prove to lenders that you can be trusted and will help you start to build your credit history.

Improving your credit score is not a quick fix but has many long-term benefits. As long as you manage your money responsibly, this will pay off eventually. Remember to regularly check your credit report and keep on top of making payments on time every month to avoid damaging your hard work.

Whether you’re thinking about applying for a mortgage, credit card, personal loan, overdraft, car finance, or any other form of credit, the lender typically conducts a credit check as part of their decision-making. For some job roles, especially in the financial services sector, credit checks are run on applicants as standard. Employers will start off by validating someone’s identity by verifying their identity documents, then use the information in a credit check to help them decide whether to employ or not.

Usually, a credit check involves examining someone’s credit report, which will flag up any problems the individual has had in the past with making payments. A credit check will also show up any persistent debt, and how much other lines of credit the applicant has already. Most lenders and employers will use a credit check as just one of the factors they use in their decision-making. They will also look at how you have managed accounts in the past, or in employment decisions, your CV and experience.

Why do Lenders Do Credit Checks?

Lenders do credit checks to work out whether there are any risks associated with offering you credit and how likely you are to pay it back, based on your financial history and personal circumstances. Employers want to know whether your debt position might put you at risk of committing fraud in a responsible position in the organisation. Depending on the type of credit you want, lower interest rates might be offered to applicants considered low risk.

What is a Hard Credit Check?

A “hard” credit is when you submit a full credit application, for example a credit card or loan application. The lender will do a thorough review of your credit report the fact you have applied for credit will be recorded on your credit file and might have an impact on your credit score. As well as when applying for credit, loans or mortgage, hard credit checks will be done when you are taking on a new rental property, mobile phone contract or utility bill. Lenders and other companies such as a letting agency are not allowed by law to run a hard credit check on you without your permission. Too many applications for credit in a short period of time can ring alarm bells with lenders, so should be avoided.

What is a Soft Credit Check?

A “soft” credit check is commonly used for insurance or credit quotes, mortgage pre-approvals, credit card eligibility assessments, and by price comparison websites. A soft credit check is often marketed as a way of checking whether you are likely to be accepted if you decide to proceed to a full application. Checking your own credit score and report also counts as a soft check. Soft checks will not affect your credit score, so you can check your credit score on one of the popular apps as often as you wish.

Most credit checks run by employers are soft checks; they are simply assessing your financial position and getting information about your debt.

When you apply for a new credit card or mobile phone contract or try to get a bigger loan such as a mortgage, lenders want to examine your credit history. This process is also sometimes done when you apply for a position involving financial responsibility, such as in a bank or insurance company. A credit search includes assessing the total amount of credit extended to you and how you’ve managed your repayments. Lenders or employers will look at this information to see whether you are likely to be able to pay back any money they lend, or to see whether your financial situation could put you at risk of being tempted to steal or commit fraud.

What Information is Included in Your Credit Report?

Your credit report will have the following key pieces of information about you:

• Address details – both your current address information taken from the electoral roll, as well as any recent other addresses.
• Details of any credit agreements, such as loans, credit cards, mortgages, and overdrafts, including records of any missed or late payments. The report will also state who the credit is owed to, and the total amount of money owed.
• Legal information about debt and repayments, including county court judgments (CCJs), bankruptcies, and insolvencies.
• Financial associates, if applicable. This could be someone you’ve taken out a joint mortgage with or have a joint bank account with. Lenders may consider this other person’s financial behaviour when deciding about your credit application. Someone at the same address, who you have no financial links with, is not a “financial associate”.

What Information is Not Included in Your Report?

There are lots of myths and misconceptions about what information people can see when they run a credit check on you. Your credit report does not include information about your employment history, savings accounts, criminal record, medical history, ethnicity, religion, marital status, or political affiliation.

How do Lenders and Other Organisations Use a Credit Report?

Lenders take the information contained in your credit report to look at how you manage your finances. Each lender has their own criteria about who they will lend to, so they analyse your credit score along with other details you provide, such as your occupation and income, to decide whether you meet their criteria as a suitable candidate for lending. Their primary aim is to decide whether you are likely to pay back any money which they lend to you.

Organisations can only access your credit report only if they have a legitimate business reason to do so. Additionally, organisations may access certain aspects of your credit report such as your address history to verify your identity, which helps in fraud prevention. If you are being asked to undertake a credit check as part of a job application, your employer will have to get your consent first. Any credit check as part of the process for getting a new job is a soft check and won’t affect your credit score.