How to Increase Your Credit Score as a Student

Credit scores are (annoyingly) not often something you’re taught in school or university (unless you study accounting and finance, of course) but they’re vitally important and can have a huge impact on your future.

Having a good credit score is important if you ever want to apply for a mortgage, a credit card, or a loan. It might also affect your car insurance, bank account and mobile phone bill.

So, basically, it’s pretty important.

If you’re unsure how to improve your credit score (or what a credit score even is) you’re definitely not alone. 

In this article, we’ll be explaining the ins and outs of credit scores: what they are, how to check them and what should you be doing to boost yours. 

So, what exactly is a credit rating?

Imagine you want to take out a credit card. To apply, you go online to your bank’s website and fill out a few details about yourself and your finances.

Your bank will then check your credit report: a record of your reliability in the past of managing and repaying debt, including loans, credit cards and bills. Your credit report is a detailed record of your credit history, and includes detailed personal information, information about credit accounts and public records.

This report will be used to calculate your overall credit score, along with any additional information you supply. It will show potential lenders how reliable you are with repayments.

The higher the credit score, the lower risk you are to a potential lender, so banks are more likely to offer you loans. 

In other words, if you have a low credit score, you won’t get that credit card, because a low credit score = a high financial risk. 

Why should I care?

Here are some of the things a poor credit score can impact:

• Renting a house/flat: The landlord may run a credit check on you to make sure you can afford to pay the rent. If you have a low credit score, they may assume you’re a high-risk individual and will be put off renting a property to you.
• Getting a job: Employers may run a credit check before employing you to ensure that you are fit to take on the role.
• Rejection of loans: A poor credit rating might make it harder to get mortgages, personal loans, car loans, credit cards and even some federal student loans.
• Mobile phone contracts: Many providers run credit checks before taking on a new phone customer to ensure that you’ll be able to pay on time.
• Your insurance premiums: A poor credit rating might mean that insurance customers will charge you a higher premium as you will be perceived as higher risk.

When you apply for any of these, the potential lender will usually check your credit score, and if you have a low credit score, you most likely won’t be offered the loan. 

Okay, but how can I check my credit score?

Checking your credit core is relatively easy. You can use credit reference agencies such as Experian, TransUnion and Equifax, which will all have a record of your credit rating.

Checking your score will help you know where you stand when applying for credit. As you improve your score, you will have access to better financial deals, such as lower insurance premiums.

How can I improve my credit score as a student?

There are plenty of ways to easily boost your credit score. Your future self with thank you for it. 

What to do

1. Make sure you’re on the electoral register: This will easily allow lenders to verify who you are, which will boost your chances of being accepted for credit.
2. Use your credit card cautiously and often: Using your credit card often and repaying it on time and in full will show lenders that you’re reliable and can be trusted with money.
3. Get a phone contract: Again, this will show lenders that you can reliably pay on time.
4. Pay your bills on time: If you can pay your other bills on time, lenders are more likely to trust you to pay back a loan, as you look financially stable and responsible.

What not to do

1. Keep applying for credit cards after a rejection: If you’ve been turned down for a credit card, the worst thing you can do is keep applying. It’ll look to lenders like you’re desperate for quick cash and might further worsen your credit rating.
2. Have multiple overdrafts: Multiple overdrafts are a massive red flag for lenders as It suggests that you can’t manage your spending responsibly.
3. Have loads of unused credit accounts open: If you have too much credit available, lenders think you won’t be able to cope with any more.
4. Use up all your available credit: Alternatively, try not to use up too much of the credit available to you, as this may also prevent your score from increasing.

In case you were wondering, your government student loan will not affect your credit score. It won’t even appear on your credit report – so don’t worry.