Ways To Build Your Credit Score As A Student | The Full Guide
Credit Score! An immensely grown-up phrase made up of rather intimidating words. Everyone tells us how important a good credit score is, so what exactly does it entail?
You must have a good one to get the right credit cards, loans, cars, boats, flats and houses. A bad credit score means you are failing at adulting… or at least that’s how it can feel.
If you find the whole situation confusing or intimidating or are just plain lost with all the jargon, never fear! We are here for you with the rundown of everything you need to know about credit scores, how to get one and how to improve it once you have one.
What is a credit score?
Let’s start off at the beginning. We always find that is the best place anyway! Everyone has a credit score. It is a number between 300 and 850 given to us by banks or other financial institutions to measure your “creditworthiness”. This number is intended to provide lenders with an indication of how likely you are to pay back the credit if they lend you money. These scores are calculated using vast swathes of data, both personal and financial.
Why is it important?
It may not be high up on your agenda at the minute, but being able to borrow and have credit can be a useful thing in the future.
A solid credit score is not all about just borrowing. A good credit score can open options for better savings rates, such as access to preferred customer ISAs (a type of saving bank account). It can also help you open a premium account with a bank with better benefits/options.
Ultimately, a good credit score gives you greater interest options when you borrow, eventually saving you cash money!
Will my student loan affect my credit score?
The short answer is no (Phew!). Your student loan will not impact your score and does not appear on your credit report! A lender will only know if you have a student loan by asking on their applications whether you have one.
How do I check my score?
Three prominent credit score companies allow you to keep track of your score. It’s important to note that these agencies don’t calculate the scores using the same calculations, and it is common for your score to vary between providers. Suppose you’re looking to really get a handle on your credit score. In that case, it is advisable to check multiple agencies for the best overall idea.
The leading credit score agency, it offers two tiers of membership; a free service and its CreditExpert service at a cost of £14.99 per month. Both options allow you access to your credit score and provide alerts to new entries on your credit report.
TransUnion is not often employed by institutions and is more of a consumer score. This is an entirely free service and it makes money through paid advertisements, commonly from credit card companies. Before committing to any credit, you should always research your options thoroughly!
Equifax scores can be checked directly for £7.95 per month or for free on ClearScore.
Again, ClearScore is not associated with Equifax and as a free service, they will serve you ads for loan and card offers. CreditKarma, another free service, pulls your information from several different sources.
This may be a shout if you want to know the lay of the land before committing to any credit.
When checking your score, the level of information depends on the provider you use and whether you want to pay monthly for the enhanced services on offer. Generally, they are all beneficial starting points and include a number of hints and tips for keeping your score healthy.
Another valuable aspect of these sites is that they provide updates or notifications for new items found on your credit report. This is a crucial way to find out early if someone is trying to take out credit in your name fraudulently!
So, I have checked my Credit Score. How do I improve it?
There are a number of really easy quick wins to improve your credit score and other long-term score building rules to keep in mind whenever you are making decisions regarding your finances.
1. Update your Information
Ensure all your information on whichever credit tracker you are using is up-to-date and accurate. The more details you have of you and your accounts, the more precise the score will be.
2. The electoral roll
Every single credit score agency will tell you the same thing, join the electoral roll. Even if you are renting for the term and changing addresses for the next three years, make sure you sign up to the electoral roll for each address to boost your credit score. We never really understood why this is important. BUT apparently, it allows lenders to independently verify your identity because the information is stored on the electoral register! It takes two minutes to do online and is an effortless little way to boost your credit score.
1. Don’t miss payments.
Missed payments are a major no no when it comes to credit providers. If you can show that you never miss your bill payments, a lender is more likely to look favourably on your loan or credit card application. (FYI when we say bills, we mean phone, rent and utilities, not your Netflix subscription!)
This really is something to live by because one or two missed credit payments can really damage your score and take a long time to remedy in the future. The easiest thing to do is to set up direct debits to leave your account early in the month or at the point in the month when you are guaranteed to have money available. That way, you won’t miss your payments and keep boosting your credit score without even thinking about it!
2. Don’t continue applying
You’ve just received a rejection for a credit card or loan from a provider. It is often the gut instinct to try and apply again or find a different provider who will allow you to open an account. Remember, every application you make is accounted for on your credit score because each application will involve a credit check. Multiple applications can seriously harm your score.
Tip: Carry out comparison/eligibility tests on comparison websites before applying directly to lenders. These use soft credit searches that do not have a lasting impact on your score and give you a good idea of whether you can expect to apply successfully.
3. Get Credit
Somewhat ironically, the best way to improve your credit score is to get some credit. Some banks offer student credit cards with low limits and favourable interest rates. By using the credit available and paying it back regularly (in full each month is best for credit score building), you’re showing providers you can make regular payments.
Please, please, please always do your research before committing to a credit agreement. You should do your research before even applying! Need some more finical help in other areas of life? Make sure to check out our blog on how to get free/cheap train tickets in 2022.