Let’s face it, being an American overseas can sometimes be really difficult. Finance, taxes, and banking are just a few areas that will probably give you headaches for years, if not your entire life living overseas. Many banks will either hesitate or flat out refuse to do business with you because of your American citizenship (and the complex reporting requirements the bank will need to comply with to take you as a customer). In particular, credit scores are very difficult for Americans to establish in the UK for several reasons. Luckily, I’ve figured out how to hack the system so that you can immediately start with a bank account and begin building credit history in your first year in the UK.

There’s a related topic in tax compliance and the benefits you get as an expat under the US/UK Tax Treaties, but we will get into that another day with a separate article. This article is about banking and credit as an American in the UK.

Before You Move to the UK

Unfortunately, my situation in moving to the UK meant I had very little time to both research and plan my move to Britain. I moved here in March 2020 mere days after my visa was approved to beat the impending legal restrictions of the emerging pandemic. Had I more time, there’s a number of things I would have done while still in the States to ensure I was ready to go in the UK.

In my opinion, the most important thing you can do is have a relationship with American Express US before you leave the US. This one thing will save you tremendous amounts of time, effort, and sorrow in establishing your financial life in the UK. If you have an active US credit card with American Express, you can easily open an American Express UK account as part of their global transfer program. All you need to do is call American Express once you arrive in the UK and have settled into your new British home for a bit. They will handle setting up your UK account. No credit check required! It’s powerful and it allows you to sidestep years worth of grueling credit-building that is frankly very hard to do as a non-native resident. It is vital that you do this before you leave the US as it will be exponentially harder to do once you are a UK resident.

You should also sign up for a Transferwise account. At a minimum, this will give you access to the UK banking system immediately – Transferwise gives you a real UK Current Account, complete with sort code and account number. This will allow you to interface with any other bank on Faster Payments (the UK instant transfer system). This will likely be crucial in setting up things like bill pay (mobile phone companies may only allow direct debit from a UK bank account), council tax, rent payments, etc. Transferwise isn’t a substitute for an actual UK bank account, but it’s a great way to hit the ground running. Transferwise is most important for exchanging currency, however. You’ll pay minimal fees for converting dollars to pounds, and vice versa. Transferwise also gives you US checking account details so that you can use ACH transfers to get dollars from your US bank account.

If you have retirement accounts, especially an HSA, top up your annual contribution to the max allowed for the year before you leave. Open or roll over any retirement accounts you may need or have before you leave the US – you will be unable to do so the very moment you land in the UK and become a tax resident there.

Opening a UK Bank Account

Americans are tricky customers for foreign banking institutions. Thanks to various laws passed in the US over the years, there are strict reporting requirements for foreign financial institutions on their American customers to US government bodies (like the IRS, the Treasury Department, etc.) – noncompliance results in penalties that are pretty extreme. Because the United States controls world finance via sanctions, penalties, and other forms of pressure on the rails of finance (like SWIFT for example), institutions that don’t even have a presence in the US comply with these requirements. What this means in practice is that many overseas banking institutions simply won’t take on American customers.

I think the troubles I had in initially opening a bank account were mostly related to the pandemic, however. My wife and I tried to open a joint current account (similar to a US checking account) with multiple banks in April 2020, but were turned away due to “reductions in service” at most of them. The only bank that played ball with us was HSBC UK, where we were able to open a joint current account. You can also open savings accounts (though with interest at 0% it hardly seems worth it these days).

You need to have a few things to establish your right to open a bank account in the UK. You will need to prove your address, so the sooner you establish bills in your name at your UK address (and get paper copies of those bills), the better. One easy one that you will need to establish immediately is your council tax bill. Your utilities, Home Office correspondence, and other items addressed to you will usually suffice. You will also of course need a copy or proof of your residency visa.

I’ve subsequently opened an account with Virgin Money to take advantage of their UK-leading interest rates (at time of writing, an okay 2% AER on £1,000.00 and a measly 0.35% on everything else). I can’t speak for any of the other high street banks, expect to say that during the height of the pandemic’s early days, we were refused by Lloyd’s, Barclays, Nat West, Nationwide, Metro Bank, and others, even with adequate documentation on address and right to be in the UK.

As previously mentioned, we will get into all the wonderful complexities of your tax obligations as an American overseas in a separate article. However, the general rules as far as opening tax-advantaged retirement accounts goes something like this: any tax-advantaged retirement account you open in the jurisdiction in which you are domiciled has tax-sheltered status in both the UK and the US. For example, if you are a US resident and you open an IRA while living in the United States, then move to the UK, your IRA is protected from tax in both the US and the UK. However, if you open an IRA while living in the UK it will not have any tax protections in the UK; it will be treated like a normal, taxable brokerage account by HMRC. However, the flipside is that you can open an ISA or pension account while living in the UK and it will always have tax-sheltered protection in the US.

This is my general understanding of the retirement account issue as of 2021 and the summary above in NO WAY should be relied on as specific advice. I simply wish to give you a good starting point for doing your own research. I have an accountant who handles my affairs here in the UK and I get great advice from them. I suggest you do the same, this is very complex stuff!

Establishing Your UK Credit Score

Let me tell you, establishing credit in the UK as a foreigner is very hard to do. Hell, it seems pretty difficult even if you’re a native born British national. If you’ve never experienced the struggle and frustration of systemic injustice, you will quickly learn about the troubles that immigrants face all over the globe via the UK credit scoring system and the catch-22s it places you in.

If you’re good with your finances in the US, you probably have a decent handle on your US credit score. The unfortunate reality is that no matter how good your US credit score is, it has absolutely no effect on your UK credit score. Even though the credit agencies are all the same (Equifax, Experian, and Transunion), there’s no interoperability between the US and UK divisions. You essentially have to start from scratch. You face the constant dilemma of “how do I establish credit history if no one will extend me credit because of my lack of history?” – it’s a significant problem with no easy answer.

The first thing to take note of is that your UK score is calculated slightly differently than your US one. For example, your address history and time you’ve spent in country directly affects your score. If you have less than 3 years of reported address history, you will likely be refused every application for credit from a bank. Another thing that is different (and in my humble opinion, an injustice to foreigners) is that being registered to vote in the UK directly impacts your credit score. Of course, you may ask, “are non-citizens allowed to register to vote in the UK?” and the answer is “usually, no!” You certainly can’t as an American unless you have dual-citizenship with a place that does have the right to vote in the UK. This was all terribly complicated by Brexit, so I’m not even sure how any of that works anymore. Point being, you have the deck stacked against you from the start as an American.

Frustratingly, every credit card that is advertised as “great for building or repairing credit” is really a product for the native British – your lack of address history as an immigrant will lead to automatic denials from each and every one (believe me, I tried). You will be very tempted to apply for these since that’s what you do in the States, but please, don’t bother as it’s a waste of time. Another thing the British lack are secured credit cards. In the States, some banks or credit unions offer credit cards backed 1:1 with deposited cash for people with low or no credit history, but unfortunately no such product exists here, at last as far as I can tell.

As well, the UK credit system is a lot more rigid. Whereas in the United States it is often possible to override the automated systems by speaking to a reconsideration professional at the bank after a system rejection, no such process exists in the UK. You will get feigned sympathy from those on the phone, but no credit card.

There are, however, small things you can do to help establish and build credit history in the UK, and the sooner you start the better for your longer term prospects of buying a home or receiving a loan.

The first thing I recommend you do is obviously to take care of the America Express steps mentioned in the “Before You Move to the UK” section above. Should you do this, you will be able to immediately establish a credit profile with all three reporting agencies via American Express UK. Your score will still start out fairly poorly, but this will give you a) a report that exists (as being someone outside the system is a difficult first hurdle to overcome) and b) monthly credit usage updates. Your score will slowly improve over time. I can’t stress this enough, doing this will save you an enormous amount of time, effort, and grief.

The second thing you can do is sign up for a service called LOQBOX. This is a pretty clever company that allows you to establish credit history via a loan that is reported to the credit reporting agencies. My understanding of how this product works is that when you sign up, you specify how much you want to pay each month (£150.00 a month might be a good starting point). They will “sell” you a fixed account (probably backed by a 12 month bond or something like that) worth the full amount (so in the case of a £150.00 a month payment, that’s £1,800.00) that you cannot access until the end of the 12 months. In order to purchase this fixed account, LOQBOX will extend you a personal loan for the full amount at 0% interest that you pay back over the 12 months with £150.00 each month. At the end of the 12 months, you gain full access to the £1,800.00 and your loan is paid off – LOQBOX makes their money by charging a small withdrawal fee when you transfer the money back to your bank. On your credit report, it will be reported as a personal loan. You’ll have 12 months of payment history and a successfully paid off loan. I’ve been using this product and my credit score has improved over this time, I highly recommend it.

The third thing you can do is have an arranged overdraft on your current account. In the UK, most people tend to use their current account overdraft pretty often, it’s a common thing for people to dip into it to cover bills each month before payday. What we will be using it for, however, is for your credit report. You see, your arranged overdraft gets reported as a line of credit to each of the agencies. It’s pretty easy when you open a new current account with a bank to also receive an overdraft of about £500.00 to £1,000.00. It’s crucial that when you open the account and they ask you about overdraft, you say yes! You may think “I’ll never use it, I don’t need one” and your American brain may even have a negative reaction to the question (“what, do they think I have no money?”) but rest assured, this is a good thing to set up, even if you will never use it (and ideally, you won’t as the APR is something like 28% – yikes).

Lastly, sign up for a service like Credit Karma UK so that you can confirm when your credit profile starts to actually exist. There’s a number of services out there and you can mix and match to cover all three agencies. The credit numbers are different than in the States, but you’ll get the hang of it, and it’s pretty straightforward.

In Conclusion

Establishing banking and credit in the United Kingdom can be difficult for Americans, but by being proactive before moving here and taking the right steps, you can make it a lot easier on yourself. Whereas a lot of immigrants may take 3 or more years to even begin to properly establish their credit history, by following some of the steps here, you can achieve success much sooner.

This article contains promotional links that compensate Scott if you sign up for a plan or make a purchase. I’ve not been contacted or solicited by any of these providers to promote their services; I’m just a big fan of their companies and products – and I’m a daily user. Thank you for your support, it helps me pay the bills!