Students and Credit

Introduction

It is a well publicised fact that students now graduate with an average debt of £12,000 and that they may need to borrow funds to help them through the duration of their studies.

There are some simple measures students can take to gain a better understanding of the credit information process and ensure they can obtain credit whilst at University and, as importantly in later years.

Manage your finances - don't over commit...

Managing finances when there is little income is a huge challenge for students. If not handled carefully, it could impact your access to credit in the future when you are earning. You may be tempted to apply for one of the many credit card deals, loans or finance agreements that are now available. But it is important to remember that any finance agreements have to be paid on time or, just like any other individual, as a student, you could find yourself financially over committed. This may have a detrimental impact on your ability to obtain credit later in life.

Checking the information that is held by the credit reference agencies is also important. It is important to be proactive in understanding the credit reference process and to check the information held on you by the credit reference agencies before making a credit application. For example, students who are sharing accommodation and take on joint credit commitments, such as the rental of a TV and video, should make sure instalments are paid on time. Missed payments will be logged with credit reference agencies and may affect future applications for credit.

Furthermore, if a financial agreement is taken out jointly by several students, say sharing a house or flat, a financial link will be made at the time of this joint commitment. So it is important that on completion of the financial agreement, a Notice of Disassociation is lodged with the credit reference agency so that the individuals' credit files are not linked in the future. [Note - data protection changes due to take effect soon will only create a financial link on your file for a brief period of time]

Top Tips for Students

• You should order a copy of your credit report. This will show the information potential lenders see.
• Plan ahead - know what out-goings will be incurred on a monthly basis.
• Although details of student loans are not held by the credit reference agencies, credit cards and other credit agreements are, so always keep on top of repayments.
• Aim to pay credit or store card bills on time - consistent late payment will appear on your credit report and influence a potential lender's decision to grant credit in the future.
• Even as a student, you should make sure you are registered on the Electoral Roll - this information is used by lenders to confirm residency.
• If a County Court Judgment (CCJ) is issued, it can be removed from your credit file if it is paid within one month. If you take longer than a month to pay the CCJ, it will remain on your credit file for six years.
• If you find yourself in financial difficulty you should contact your lenders as soon as possible and come to a new arrangement for repaying your debt.