Many students would rather party the night away as opposed to discuss credit ratings – but that doesn’t mean they’re not important. As a student, it is very unlikely you’ll have much of a credit score but that doesn’t mean you shouldn’t get a head start.
With 1 in 4 UK adults at financial risk, it’s best to get into good habits as early as possible.
What is a credit score?
A credit score is a number between 300-850 that decides how likely (or unlikely!) you are to get credit. Your credit score depicts a consumer’s “creditworthiness”, meaning that the higher the score, the more likely you are to get approved for things such as credit cards, loans and even matters such as a phone contract.
As credit scores are updated monthly, your credit score can change throughout your life depending on your financial history and personal circumstance. Whilst credit scores can change relatively quickly, luckily for students, student loans don’t affect your credit score.
How to improve your credit rating
As well as affecting how likely lenders are to consider your application for finance, the higher your credit score the more likely you are to receive more competitive interest rates, as well as a more generous credit limit.
Your credit score can affect lots of different areas of your life and a poor credit score can impact:
- Getting a job
- Mobile phone contracts
- Insurance premiums
To name but a few!
Luckily, there are some tried-and-tested ways to improve your credit rating. For example, there are plenty of loans for students with bad credit that can improve your credit score as borrowing and repaying on time shows you are reliable with money. By taking out a loan as a student, not only do you have more disposable income to cover the essentials, but it’s also good to have a track record of repaying debt.
Some other easy ways to improve your credit score include getting yourself on the electoral register, making sure you pay your bills on time every month, and getting a mobile phone contract in your own name. By setting up regular direct debits to pay off various outgoings each month, you won’t run the risk of forgetting, meaning you’ll be able to keep on track of your payments.
The bottom line
Your credit score can have a huge impact on your finances in future years and those with bad credit ratings are less likely to be able to borrow and will have to pay more for any form of credit. Although it may not be top of your list of things to achieve while at university, if you’re proactive about your finances, it can be hugely beneficial for your financial health to start as you mean to go on and begin building your credit score.