No-one ever goes to University expecting to make money. In reality, most students probably realise they’re going to leave their red-brick walls of learning with a loan they’ll sooner or later have to pay back, once they’ve made it into the world of work.
But how many of them, fresh from 18 years of the Bank Of Mum And Dad, realise that student life itself may require learning some deft money management?
New research from Experian CreditExpert has found that a third of UK students have admitted to being financially unprepared for university living. The survey also found that 67% of students and graduates want to know more about managing their finances.
While nine in ten students have some form of credit outside their student loan – mainly either an overdraft or credit card, poor credit management is already evident which could negatively impact on their future financial independence.
In fact, a third of students are overspending every few months, with an amazing one in ten overspending every month. One in five are planning on applying for new credit – some simply for day to day student living, some for luxuries like a car.
Around one in six have missed monthly credit repayments, which could have a serious effect on their credit rating as missed or late payments stay on your credit report for at least six years.
What might seem like a minor detail now could impact on your creditworthiness when you are hoping for your first car loan or even mortgage after graduation. So how you manage any credit you have now can be vital.
Ahead of the new university term, Experian has launched a Credit Guide for Students and Young People, aimed at helping students and graduates understand how to use credit wisely to achieve the things they want in life.
Peter Turner, Managing Director at Experian Consumer Services, UK & Ireland said: “When you first start using your overdraft, get a mobile phone contract or a household bill in your name you are beginning to shape your financial future.
“It’s easy to get distracted by the size of student/graduate loans and overdrafts but all credit needs to be repaid at some time, and understanding the basics of good credit management will help students always be on the right track to financial independence.
What every student needs to know about credit:
1. How it all worksWhen you start using credit facilities, such as overdrafts, credit cards and even mobile phone contracts, information on how you manage these credit facilities will appear in your credit report. Your credit report will help lenders access your creditworthiness into the future based on how well you have managed credit over the last six years. You can see your Experian credit report with a 30-day trial of CreditExpert.
2. Building up a pictureWhen you apply for credit, your name and address will be checked against the electoral roll so that the lender can be sure that you are who you say you are and live where you say you live. Whatever you do, it is essential you register to vote somewhere, even at your parents’ home and give that exact address when you apply for credit.
3. Information about other peopleYour credit history can only be linked to other people if you have a financial link with them. Paying the rent together doesn’t count, although you will be linked to people you share with if you put multiple names on a credit agreement such as an electricity bill.
4. Think before you borrowIf you are a student, you’ll probably take advantage of one of the special bank accounts on offer many of which include interest-free overdrafts, but remember that you will need to pay the money back when your course ends. Never go over your overdraft limit without permission from your bank. Always speak to your bank if you are struggling.
5. Don’t forget to budgetTo build up a good credit history you must make all your payments on time. How you manage any credit you have now will affect your chance of getting credit in the future. So use credit wisely and budget to make sure you don’t spend too much.