5 Simple Ways to Improve Your Credit Score as a Student

Photo by Avery Evans on Unsplash

All too often I’ll mention my credit score to a friend or colleague of mine and I’ll get one of the following responses:

1. ‘What’s a credit score?’
2. ‘Oh, I don’t think I have one of those.’
3. ‘I never worry about things like that.’

As you can probably guess, these are not the proper attitudes you should have towards your credit score, even if you’re superbly rich and buy anything and everything you want. Everyone has a credit score, and everyone should look after it. Credit scores are incredibly important as they can drastically alter the course of your life if not properly cared for.

It’s especially important to improve your credit score as a student. It sets you up for easy mortgages and loans later in life, and while you’re a student you have very little financial burden, as you probably don’t have kids to look after, car loans and the like.

What is a credit score?

Essentially, your credit score is a number that lenders will look at when deciding how much of a risk they would be taking if they were to lend you money. The actual number you see when you check your score will vary, as different credit rating agencies (CRAs) have different scales with different maximums and so on. In general, though, a higher number is a better number.

The higher the credit score you have, the lower perceived risk you are to lenders, which will affect how eligible you are for mortgages, credit cards, loans, car financing and any other money lending service. Not only that, but it can also affect the interest rate on said loans, as lenders can trust that you’ll pay the loan back, so they don’t need to hit you with huge interest as insurance.

You can check your credit score with a number of different services, but if you’re in the UK, I generally recommend using Experian.co.uk as they’re the largest CRA in the country and are most often used by lenders when assessing your creditworthiness. It’s free to check, and you can do so by signing up to the service, which takes 10–20 minutes depending how well you know your address history in the past three years.

Once you’ve done this, you’ll be given a score from zero to 999, with 999 being the absolute best score you can get.

As you can see, my credit score is currently sitting at 989, which Experian classifies as ‘Excellent’. I’m going to share with you some of the ways I improve and maintain my credit score. Please be aware this is not financial advice and is purely based on my personal experience, so make sure you check my facts if you’re not sure about anything and speak to an accountant if you feel uncomfortable taking any of the actions below. Otherwise, keep reading to see how to improve your credit score as a student!

Administrative tasks

It’s actually fairly easy to improve your credit score as a student provided you have a laptop or phone to hand. The first thing I recommend doing is getting on the open electoral register. If you live in the UK, you can vote at age 18 but you can actually register to vote at 16 (or 17 if you’re in Scotland).

When you do this, you are put on the ‘electoral register’ — a big list of people who are registered to vote in the country. However, you will also have the option to sign up to the ‘open register’. This is an opt-in version of the electoral register that is available to be purchased by organisations such as charities, companies or, as you may have guessed, lenders.

By checking your credit application against the open register, lenders can confirm that you are who you say you are and that you’re not committing identity fraud, which lowers their risk when it comes to giving you a loan.

Note to students: if you have separate home time address and term time address (which most do), then you can register to vote at both. This won’t have a huge impact on your credit score, but it means you can have an impact on local elections in both places by casting your vote when the time comes. You’ll still only get one vote in national elections or referendums, however.

The second admin-y task you can do to improve your credit score as a student is to actually check that all the details on your credit report are correct. Most CRAs won’t let you access your full credit report for free, but Experian has a service called CreditExpert which will allow you to see this data and query any inaccuracies that might be negatively impacting your credit score. It’s not free, however you can get a 30 day free trial which should be enough time to make sure everything is in order. Experian will also provide phone support to assist you in clearing up any issues with whoever registered them, be it your bank, a utilities provider or anything else.

Debt

Unsurprisingly, one of the best ways to maintain a high credit score is to stay out of long term debt as much as possible, especially if you’re young.

Students: most student current accounts will come with an arranged overdraft of £1000 or more. To improve your credit score as a student do not use it unless absolutely unavoidably necessary. And, if you do have to use it, pay it off as soon as possible.

Of course, that applies to anyone with an arranged overdraft. What you really don’t want to be doing is going into an unarranged overdraft if your bank provides one. That can really harm your score if not paid off almost immediately.

Also, as tempting as it may be, never max out your overdraft, and never be overdrawn on more than one account at any one time. This suggests to lenders that not only are you short on cash (and therefore can’t pay them back), but that you have a bad reputation for not paying back what you owe.

Finally, never take out a short term ‘payday’ loan. These are loans for a relatively small amount of money with a really high interest rate, and generally come with the understanding that you will pay it back as soon as you’re next paid by your work, hence the name.

These can seriously, seriously, affect your credit score. So if you only take one piece of advice away from this article let it be this:

Never take out a payday loan. If you really, really need the money, it’s far better to ask for a short term loan from a friend or family member.

But the best thing to do is, of course, to budget and save properly so you don’t need a loan at all, and I’ll have more articles on how to budget coming up. Alternatively, click here to see how I save and invest as a 20-year-old student living in one of the most expensive cities in the world.

Credit cards

Though this section may seem very antithetical to the last, having a credit card can actually boost your credit score if you’re sensible and don’t use it to spend money you don’t have.

There exists a special category of credit cards called ‘credit builder’ or ‘improve credit’ cards. These are essentially cards with a low balance and high interest rates that allow people to use a credit card without going overboard (low balance) and motivating them to pay back what they owe as soon as possible (high interest rate).

You can find out which credit cards you’re eligible for by going to experian.co.uk/consumer/credit-card, choosing ‘Improve credit’ and filling out your details to see what offers are available to you.

I highly recommend going for a card with an 80% or higher approval chance (or a pre-approved card) as a rejection will be filed on your credit report and can harm your credit score. As mentioned earlier, if this is your first card, it’s much safer to choose one with a lower balance as this way you won’t accidentally get into huge amounts of debt.

And remember, if your application gets rejected, leave it some time (a month or so) until you apply for another card, as getting rejected many times in succession will harm your score.

If you get accepted, congratulations! Now all you have to do is follow these tips for using your new credit card to boost your credit score:

1. Don’t use your card for your daily spending (groceries etc.). Only use it on large-ticket items of £50 or more and only if you have the money to pay for the item in your bank account, so if you needed to pay it back immediately, you could.
2. Pay your credit card balance off as soon as possible either by manually making a payment as soon as your transaction shows up on your account or by setting up a monthly direct debit for the full balance of your card. I recommend the first option as it makes budgeting easier and makes it less likely you’ll end up in lots of debt.
3. Don’t max out your balance. Try to keep usage below about 25% for best results.
4. Never, ever, make a cash withdrawal with your card. Use it for in-store or online spending only. This is really important, so please keep it in mind.

Finally, when it comes time to get a new credit card, don’t keep too many unused accounts open. I generally keep only the one I’m using and the first one I had (even though I don’t use it), as this shows my credit ‘age’, and that is one factor that lenders sometimes look at. This is why it’s important to improve your credit score as a student. You start early, so your credit age increases.

Bills

All your regular bills, no matter what they are, will affect your credit score. This could be a phone contract, household bills or even your Netflix subscription. If a failed payment is not resolved quickly, it can negatively impact your credit score.

If you’re a student or are otherwise sharing a house, one thing you can do to improve your credit score as a student is make sure that it’s your name on the bills. Only do this if you trust your housemates to pay on time, but it will allow you to reap the benefits of regular payments made on time and in full without having to bear all the financial responsibility yourself.

If you feel slightly guilty about having all the gain and none of the pain, you can do what I do and take on the role of managing the bills for your household. If you’re reading this article, you probably want to know where all your money is going anyway, so this’ll help satisfy your inner control freak and also give you the perfect opportunity to make sure you’re getting the best deal possible.

It’s also possible to use your rent payments to improve your credit score as a student, even if you pay your landlord directly. There’s a service called CreditLadder that will report all your rent payments to the CRA of your choice (Experian, TransUnion or Equifax) for free, or to all three for a fee of £5 per month.

If you don’t want to pay the fee, I recommend choosing Experian. As I mentioned earlier, they’re the largest credit rating agency in the UK, so it makes sense.

As a bonus tip, if you don’t already, start paying for your own mobile contract. You can find cheap SIM-only deals online, and it’ll go on your credit report and is one of the best ways for students to have regular payments out if you don’t have household bills etc. in your name.

Credit repair

This is more a guide on what not to do, but try to avoid using ‘credit repair’ services. These essentially act as a regular bill and charge you a small amount (sometimes as low as £2) each month. While this will increase your credit score number, it can look very odd on your full credit report if lenders decide to dig a little deeper, which is something they often do when you’re looking for a mortgage or other form of large loan.

It’s much better to just follow good practices (like those mentioned in this article!) and be financially sensible.

Speaking of good practices, my final tip is to make sure you never pay for ‘credit advice’ books or packages that aren’t sold by a Chartered Accountant and are personal to you. Most of them will just give you generic advice that won’t fall very far outside of what I’ve presented to you here.

That’s it! I hope you found this article somewhat helpful. Let me know how it goes as you start to improve your credit score as a student! If you want to receive tips like these directly in your inbox, why not sign up for my newsletter? It’s completely free and will only help 😉