Search: Improve your credit rating
- Student survival guide
- Check your credit hasn't been tampered with
Doing your homework on your personal finances is probably a low priority when you start university, but with the average cost of first-year student debt now at £6000, it's now even more important to watch your spending if you want to graduate without a crippling amount of debt.
Being a student often means being short of cash. According to a recent report, more than half of UK students (56 per cent) have difficulty managing their money, with one in six finding their financial commitments a struggle and one in 20 falling seriously behind with payments or having real problems. And with the average student now leaving university owing more than £17,500, things aren't getting any better.
Luckily, living on a tight budget needn't mean losing control. Check out our guide to the eight things you really ought to know about managing your money.
1. Your financial future starts here
How you manage student debts will help you to shape your financial future, because your repayment history and details of the amount of credit you have taken on, such as bank loans or credit cards, will be registered on your credit report.
This is the personal history of your credit commitments, although loans taken out with the Student Loans Company are not currently included - but any other credit will be. It also includes other information, such as any court judgments against you.
Lenders check it, along with the information on your application form, when they decide whether to make you an offer and what interest to charge.
If your report shows that you make repayments on time and don't take on more than you can manage, you should find it easier to get better deals. It can even influence your ability to get a job or rent a home, because landlords and employers may also ask to check it.
They can't usually see your credit commitments but they can check whether you have handled any court judgments or a bankruptcy order against you.
2. Do your research
Check the market carefully and compare deals before choosing a bank account, loan or credit card, and always work out the true cost of borrowing, including fees and penalties. Free gifts aren't as useful as free banking, a sensible overdraft facility and a competitive interest rate. Many banks offer interest-free overdrafts for students.
If you are looking for a loan, your first stop should be the Student Loans Company, the interest rate is low and you will not have to pay money back until you are earning.
3. Set a budget, and stick to it
Work out how much you need to spend on essentials and don't assume you can blow everything else, always keep something aside for emergencies. It can help to set up direct debits for regular bills and you may get a discount, too.
It's crucial to pay what you owe on time. If you don't, your credit report will be affected. You may want to consider taking up a part-time job to help you cope with increased expenses.
4. Register to vote
Your credit report shows whether you are registered to vote at your current address. Lenders use this information to help prevent fraud by checking that you are who you say you are and live where you say you do.
If your name does not appear on the electoral roll or you are registered at a different address to the one you give in an application for credit, they may ask for further proof of identity or even refuse your application.
For example, if you are on the electoral roll at your parents' address but apply for a credit card from your university address, you will probably experience delays with your application.
5. Watch your credit history grow
Make certain that you're on top of your finances by checking your credit report regularly. For example, look for a record that you are paying bills and loan instalments on time. Any inaccuracies can affect your ability to get cards, loans and, eventually, a mortgage, so it's important to make sure that all of the information is up to date.
If you find anything you don't understand or think is wrong, contact a credit reference agency such as Experian that holds your report and they'll help you to set the record straight.
You may be able to add a note explaining the circumstances surrounding a temporary problem, which lenders will see and can take into account when they consider future applications for credit.
6. Protect your identity
Identity fraud is one of the UK's fastest-growing crimes. It takes place when criminals acquire enough of your personal information to borrow money in your name, draw benefits or even use your ID in fake marriages.
It can take hundreds of hours to put the situation right, so take sensible precautions.
As you are likely to be moving home quite often, forward mail and notify your bank and other lenders everytime you move, shred personal documents before throwing them out, check statements carefully and let the police know if important papers are stolen. For more advice, visit www.stop-idfraud.co.uk.
7. If you are struggling, get help
If you are struggling with repayments, your income drops or your circumstances change, always let your lenders know. They will help you to find a way forward. Increasing numbers of people are going bankrupt or taking out an Individual Voluntary Arrangement to escape debt, but it should be a last resort.
Both options stay on your credit report for many years and you could be refused credit for some time or charged very high interest because lenders see you as a high risk.
Speak to a Student Union adviser to make sure you are getting all the financial support you are entitled to. Other organisations offering free guidance include Citizens Advice, National Debtline on 0808 808 4000 and the Consumer Credit Counselling Service on 0800 328 1813.
8. Think of the future
It's tempting to live for today and worry about your debts tomorrow, but if you keep your finances on track you should have no problem getting credit such as a mortgage, car loan or credit card after graduation.
The easy way to see check your current credit status is to take a free, 30-day trial of CreditExpert, the online credit monitoring and identity fraud protection from Experian.
This will give you access to your full credit report and also alert you by text or e-mail whenever there is any significant change to your credit report that could indicate an attempted ID fraud.
To view your personal credit information that lenders are currently basing their credit decisions on, apply now for a free online credit report. Click here for a free 30-day trial and a free copy of your Experian credit report
