If you’re a student, it’s unlikely you’ll have much of a credit history. But there’s actually no better time to start getting into good habits and building your credit scores. Here’s why.
Whether you’re considering your uni options for later in the year or are already at college, life is all about following your passions, broadening your horizons and enjoying a newfound freedom right now.
Your credit scores are probably the last thing on your mind right now, but this is actually a good time to start laying the foundations of your credit history. And even though buying a house or splashing out on a flash set of wheels might seem like a distant dream, now’s the moment to start building solid credit scores to prepare for that very day.
What is a credit score, what’s NOT included in my credit reports, and how do I check them?
This might be the first time you’ve even heard the terms “credit history” and “credit score.” So, let’s get down to the nitty-gritty of just why it’s so important to pay close attention to your credit history and start building good credit scores, as soon as you possibly can.
In a nutshell, your credit history is a detailed picture of your financial status based on information from banks, credit card providers, utilities companies and other companies that provide credit. Credit reference agencies take this information and crunch all the numbers together to work out your individual credit scores.
When it comes to deciding whether to offer you credit, businesses will look at your credit scores to help get a measure of the strength of your credit.
We all know that further education can be extremely costly and, if you’ve taken out a student loan to help you through, there’s no need to fret about it having a negative impact on your credit scores, as it’s not even recorded on your credit reports. A student loan is treated completely differently from other types of finance.
If you’re considering using a credit card for the first time, however, or thinking about taking out an overdraft or personal loan, be aware that these will all start contributing to your scores.
There’s no time like the present — find out where you stand by checking your TransUnion credit score with Credit Karma right here.
Why should I think about my credit scores while I’m still a student?
Your credit history starts the minute you hit 18 and become eligible to vote. It might seem a bit daunting to be looking ahead to the future. But your time as a student will fly by and before you know it, you’ll be out in the big wide world — thinking about mortgages, loans and car purchases.
That’s why if helps if you have a healthy financial footprint and, if you start building up good credit habits now, you could be well ahead of the game. You may be able to take advantage of better credit offers and potentially get better deals on mortgages and finance than your peers.
As a student, it can be easy to fall into the trap of spending irresponsibly and running up debt. After you come out the other side and realise the error of your ways, it could take you several years to reverse the damage.
How to build on a slim credit history
Having a slim credit history can be almost as bad as having a poor credit history — lenders are keen to see evidence of your having successfully and reliably repaid credit in the past. When it comes to building a credit history, it’s all about showing just how creditworthy you are.
Here are a few tips to get you started:
Register on the electoral roll— You may even be able to register in two places; your address during term time and your home address.
Pay bills on time — Direct debits and standing orders can be a useful way to make sure your payments are made on time.
Don’t keep applying for credit — Making multiple applications, which will be recorded on your credit file, could affect your credit score.
Consider taking out a student credit card — If you’re sure you’ll be able to meet your repayments on time, credit cards can be a good way to start building up your credit scores. Some banks offer a student credit card with a lower limit. But remember, credit cards are not free money and should always be used responsibly.
Check your details — You can check your credit reports at one of the three major U.K. credit reference agencies to see if all your details are correct. Checking your credit reports won’t affect your credit scores.
Possible pitfalls
There are all sorts of factors that could put a serious dent on your credit history, and it’s important to be aware of these right from the start.
- Always keep on top of your rental payments
- Steer clear of missing debt payments or not settling your credit cards on time
- Get wise to payday loans that may be detrimental to your credit history
- Don’t be tempted to use your credit card to withdraw cash from an ATM — it smacks of poor money management
Bottom line
On top of furthering your education and growing from new life experiences, your student days are a good time to start thinking about your credit history. Wise up and manage your money carefully from the get-go — and you’ll soon be on your way to building healthy credit scores and getting a foot up on the credit ladder.