Becoming a student is an exciting time in life. And for many it is the first time taking on new financial responsibilities, like building your credit score. You might be wondering how to increase your credit score as a student, or more likely, why do I even need a credit score as a student? Either way, Loqbox has done the studying for you. Here are our top tips:
Wait, what is a student credit score?
Your credit score is basically a number that lets you know how creditworthy lenders think you are. It’s a reflection of your credit report, and you use it as a tool to help you understand how a lender may view your application.
There is no such thing as a ‘student credit score’, nor is there one ‘universal credit score’ that can guarantee you’d get accepted for every credit application.
You have three scores that follow you throughout your adult life. They reflect how well you’ve managed any credit and borrowing in the past, including any missed payments, whether or not you’re registered to vote, or any people you share a joint account or bill with… You can read more about credit scores here.
Your credit scores are calculated by the main three credit reference agencies (CRAs) in the UK: Experian, Equifax, and TransUnion. You can learn more about the UK’s credit reference agencies and the difference between them here.
If you don’t know your credit scores you can check them for free, as often as you’d like to and without harming them, using these great services:
*For transparency, we wanted to let you know that ClearScore pay us a small commission if you sign up using this link.
If you’ve just left school, your credit file could be quite ‘thin’ as you may not have used credit or borrowed money yet. That’s perfectly OK!
It’s also probably worth noting that your student loan won’t be listed on your credit history and it won’t have any impact on your credit score. Student loans can be quite large, so it makes sense that you’d be concerned. But the only way lenders would know that you have a student loan is if they request that information on credit application forms.
What is a good credit score for a student?
Your three credit scores are calculated differently by each credit reference agency, so there’s no one number that’s “good” or “excellent”.
As a student who hasn’t used credit yet it could take time to get a “good” rating. Don’t be disheartened if it’s low to start with. The important thing is to get started and maintain good financial behaviours. That can work wonders for your credit score.
Student credit scores, why do I need one?
Well, having a good credit score opens lots of doors in the future, making it easier to get loans, rent a flat, get the best interest rates, or even get phone contracts. Lenders check your credit history when you apply for credit and use it to decide whether to lend you money and at what interest rate they’ll expect you to repay it.
When it comes to large loans like mortgages, better interest rates can save you £1,000s in the long run. So, to give yourself the best chance at financial wellbeing, let's explore how to increase your credit score as a student (while still having fun at uni!).
How to build your credit score as a student?
Get on the electoral roll
One of the easiest ways to give your credit scores a little boost is to get yourself onto the electoral roll. If you don’t know what it is, the electoral roll is a list of everybody who is eligible to vote in the UK. Lenders use this list to confirm the identity of people applying for credit. If you’re on it, they’ll feel more comfortable lending you money.
Pay your bills in full and on time
For many students, uni is the first time you have to manage paying rent and bills. Your credit history and score will reflect how responsible you are with your bills, so make sure to start with the right habit by paying your utility bills, rent, and phone bills, in full and on time.
Missed or late payments can have a negative impact on your credit score and will stay on your credit report for six years. Learn more about missed payments here.
Become a named bill payer
Speaking of bills, though. Being ‘named’ on them is very helpful for your credit-building efforts. If you’re living in halls or pay for ‘bills included’ then general utility bills won’t apply to you for this one. But being a named bill payer with a Direct Debit set up to pay each month, helps to build your credit history, which in turn helps to contribute to your credit score.
A note on sharing the bills — the world of renting with almost strangers is unknown territory — some people land a great deck of cards and have financially responsible housemates. Others are dealt a dud bunch, who you’re chasing for bill money from.
Whatever your hand, be mindful that if you become co-named on a bill, you become co-scored for your credit score. So, you may want to consider a way to pay the bills together, in a way that benefits you as individuals.
Keep your credit utilisation ratio down
Credit utilisation just means how much credit you’re using versus how much credit you have available. So if you have £2,000 worth of available credit and you’re £1,000 into it, your credit utilisation ratio is 50%. Generally, lenders don’t like to see you using up all your credit, it seems irresponsible, so utilisation of around 25% is better for your credit score.
Use your rent to grow your credit scores
Whether you’re paying your rent to a landlord, letting agent, parent, guardian or a friend, you can use your monthly rent payments to give your credit history a boost by getting started with Loqbox Rent.
Securely connect your bank account, tell us your rent date and amount and pay your rent as normal. We report your payments to Experian to help give your credit history a leg up.
Do international students have credit scores?
Possibly, but it depends on how long you’ve been using credit for here in the UK. If you have the intention of taking out a credit agreement in the short term of your studies here, or if you have longer term plans to live in the UK after graduating — then building your credit score now is a smart start.
If you’re wondering how to check your credit score as an international student, use exactly the same links as above – you may just find that they can’t generate credit scores for you without some evidence of using credit in the UK system yet.This is called a ‘thin’ file.
Building credit can be a bit more challenging than for UK residents, but it's not impossible. Loqbox offers three powerful credit-building tools that will help you to build your credit history here in the UK. For just £2.50 a week, or £99 for the year, you can get Loqbox Grow, Loqbox Save and Loqbox Rent. Our members have seen their credit scores improve by up to 300 points in the first three months.
Improvements to your credit score are not guaranteed.
You will of course be starting with no credit history so you will need to build one up. A lot of the UK student advice will be helpful for you too, but here’s what else you can do:
Open a UK bank account
To establish credit in the UK, you'll need a local bank account. Many banks offer special accounts for international students, so be sure to check those out. You’ll want to be able to access and manage your money in the UK anyway, so a bank account will help you to get sorted and start your credit journey too.
Follow our golden rules of UK credit building
Use these ten simple steps for credit building to get into the flow of successfully using the UK credit system, and you’ll be on your way to a better financial future in no time. Best of luck with your studies and credit building in the meantime!