Calling New Students: Cherish Your Credit Rating

Sep 27, 2013   //   by Keith McDonald   //   Money Saving Tips  //  1 Comment

As the new academic year approaches, it’s understandable that new students might feel apprehensive about managing their finances during their university years.

Those leaving home for the first time in the coming weeks will suddenly have to deal with rent payments, utility bills and course costs, not to mention the rigorous demands of socialising.

But apprehension needn’t be a bad thing. It’s all too easy to overspend when the first instalment of the student loan appears and to be left short later. Nine out of ten students end up juggling other forms of credit outside of their student loan, such as overdrafts or credit cards.

This needn’t be a problem if handled sensibly. But many students fail to recognise how poor financial management and black marks against their credit history could impact their future applications and decision-making.

Credit reference agency Experian wants new students to understand how their credit history is formed, and how their future decisions will be compromised if they run into trouble with credit during university years.

Experian Top Tips on Student Credit

1.      How it all works

When you start using credit facilities such as overdrafts, credit cards and even mobile phone contracts, information on how you manage these credit facilities will appear in your credit report. Your credit report will help lenders assess your creditworthiness in the future based on how well you have managed credit over the last six years.

2.      Building up a picture

When you apply for credit, your name and address will be checked against the electoral roll so that the lender can be sure that you are who you say you are and live where you say you live. Whatever you do, it is essential you register to vote somewhere, even at your parents’ home and give that exact address when you apply for credit.

3.      Information about other people

Your credit history can only be linked to other people if you have a financial link with them. Paying the rent together doesn’t count, although you will be linked to people you share with if you put multiple names on a credit agreement such as an electricity bill.

4.      Think before you borrow

If you are a student, you’ll probably take advantage of one of the special bank accounts on offer many of which include interest-free overdrafts, but remember that you will need to pay the money back when your course ends. Never go over your overdraft limit without permission from your bank. Always speak to your bank if you are struggling.

5.      Don’t forget to budget

To build up a good credit history you must make all your payments on time. How you manage any credit you have now will affect your chance of getting credit in the future. So use credit wisely and budget to make sure you don’t spend too much.

Part of the university experience is really learning how to manage your money; it’s really part of growing up. I think it’s important to understand that credit history absolutely begins during university years, and decisions that you make then can definitely impact you post-university. Missed payments on credit cards, utility bills, can definitely impact your score, and potentially affect being approved for a loan.

Julie Doleman, Managing Director at Experian Consumer.

Afterword: Money-Saving Tips for Students

This is quite a poignant post, as my ten-year spell as a student comes to an end this week. But, if I can survive ten years as a student without financial meltdown, there’s hope for all of us. My main tips to new students would be:

1.      Don’t be seduced by every offer.

Freshers’ Week, and particularly the Freshers’ Fair, is the prime time for university societies, local bars and businesses to promote themselves and snap up new members. But don’t be rushed into splashing your cash everywhere because of tempting offers. There will always be new offers just around the corner.

2.      Resources are finite, including your time.

Just remember: it’s not just cash that you’ll be short on at university, but time as well. University terms are intense. You’ll work hard, play hard, and probably find yourself tired quite a lot of the time. So think carefully before signing up to a bundle of societies or for an annual gym membership. They’ll almost certainly be good value; but if you never get to use them, there’s no value.

3.      16-25 railcard.

I’m going to miss this most of all (as you’re entitled to it as a postgraduate too). The 16-25 Railcard costs £30 and allows you to save a third on rail fares for a year. As we’ve pointed out here before, rail fare is notoriously expensive. As an undergraduate, I often ended up flying between Bristol and Newcastle to save on travelling by train. You’ll only need one long-distance train journey using this railcard, and it will already have paid for itself.

4.      All discipline lapses cost money.

This sounds painfully dull, but there are ways to help yourself. Not skipping meals at catered halls is a good start (you will acclimatise to the food). And bookmark the relevant page of the library website to minimise the effort required to monitor your library books regularly. It’s not untypical for a university library to accrue over £100,000 every year on fines – and that’s predominantly down to our laziness.

5.      Picking a good student bank account.

When I started as an undergraduate, there was no shortage of banks offering incentives to sign up. With a level playing field, I ended up choosing my student bank account because of its nostalgic appeal. But banks are less profligate at the moment, and it’s worth weighing up a couple of different factors, including overdraft charges and branch proximity. Most major universities will have at least one bank available on campus, which does make it easier to micro-manage your finances and speak to trained counter staff for advice.

Start right at the beginning, and just do a bit of planning and look, whether it be advice online, on campus, and there’s a lot of information out there just if you look for it.

James Eder, Founder, StudentBeans.com

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