If you’re a student, you’ll know that going to university is a huge step in life. With it comes a number of challenges and new things to learn. Moving out, becoming independent, cooking your own food and washing your own clothes – it’s fair to say that it can be quite a stressful experience. So it’s completely understandable that some students would be hesitant to start learning about their finances on top of everything else.
If you have no idea what a credit score is, you're not alone. But because credit scores are so fundamental to financial health and wellness, we'd really encourage you to learn more. And don't worry, it's not as complicated as you may think. In this blog, we’ll go over everything a student needs to know about credit, and how you can set yourself up for success now and in the future.
What is a credit score?
One of the most daunting and off-putting parts when learning about the world of credit is the large amount of jargon and specialist terminology. So let's clarify one of the simpler and more important ones: what exactly is a credit score?
We actually have a whole blog here that answers that exact question in a lot of depth. However, simply put, your credit score is a number that is calculated by banks and credit reference agencies based on your financial history, such as rent payments or paying back loans. They are essentially assessing whether or not you are a risk to lend money to. The higher the score, the more likely you are to be accepted for things like loans, credit cards and mortgages. It also means you’re more likely to be offered a better deal by lenders making it cheaper for you to borrow money.
As a student, you might not have much of a credit history for a score to be built from, which is completely fine. This means that if you start now and learn what the good practices are for building credit scores, you’ll get a big head start when it comes to getting a good score and achieving your goals in the future.
Why is it so important?
While it’s true that your credit score will become more important to you later on in life, there are still a number of things that are very important to students now. For example, getting a new flat or buying your first car. These can both be significant parts of your journey as a student. And both are influenced by your credit score. When buying a car, your score is used by lenders to make a decision on not only whether to accept your application for car finance but also what interest rate that you’d be offered. And were you to rent a property, your landlord might want to run a credit check to understand how reliable you’ll be when it comes to making payments. So having a higher score can save you a LOT of money and grief in the long run. (When we speak to people they often say they’re one regret when it comes to their credit score is that they didn’t start building it earlier.)
This is why it’s beneficial to start your journey into the world of credit as soon as possible. Not only because it will save you money, but also because you’ll make things much easier for yourself later on in life. For example, with a poor credit score you could be declined a mortgage when you apply, or you could be rejected for a loan or credit card when you really need it. If you want some more tips on how to prepare financially for life after uni, we have a blog just for you.
How can I start building my credit score?
As a student, there are a few things that you can do to get the ball rolling and start building your credit score.
1. Pay everything on time
One of the best ways to build a healthy credit history is by consistently paying bills on time. This could be anything from rent payments to phone or electricity bills. Failing to make payments on time could have a negative impact on your credit score.
2. Register to vote
Being on the electoral roll helps you get noticed by the financial system. If you live in student accommodation or a shared flat/house, registering to vote can be a good way to boost your credit score. Check out this blog if you want to know more.
3. Get Loqbox Save
Loqbox Save is one of the easiest ways to start building your credit score. And amazingly, it’ll also help you save money too (which we know can be particularly difficult when you’re a student)! By making monthly payments into your Loqbox Save, you can build your credit score and your savings at the same time. Learn more here.
And that’s why you should care about your credit score! While it might not be at the top of most student’s priority lists, you can never start too early when it comes to being on top of your finances. If you want some more tips on how to become a financially savvy student, check out this blog. That’s all for now, have fun and good luck!