Is building a good credit score important for students?

[ssd]

I'm really clueless on all this credit store stuff. I've always just paid cash, apart from my mortgage back in the day.
I read something online about it being important for young adults to build up a good credit score. Ive always discouraged my dcs to take out a credit card, but this article was saying its a good thing. My dcs have student loans and student accounts but no credit as far as I'm aware. One rents a flat with pals.

Has anyone got any advice re building a good credit score....and also explaining to my WHY they need a good credit score now? Ive always been very anti debt, but now it seems its a good thing!?!

For context, we are a low earning family.

It is a good thing to demonstrate that you can handle credit and repayments. I have just got one and use it to a third of its limit and repay it in full.

Yes it is. When they rent a property or even (one day!) apply for a mortgage a good credit score is important.

At my kids school in the sixth form they were advised to get a student credit card and, for example, use it exclusively to buy petrol or other regular everyday spending. Then - crucially- set up a direct debit from current account to make sure it is paid off in full every month automatically. This results in a good credit score ticking away in the background by way of expenditure that wouid be made anyway. It does require discipline and forward thinking on the part of the student but it is worthwhile for the future.

The other way to get a credit score off the ground is to be the account holder for utilities in a student house. What some sharing households do is have one named account holder for each bill and the housemates pay that person when the bill comes in

WHY they need a good credit score now?

I think the biggest issue is not having a credit score at all when they graduate ie they haven't had any utility bills in their name, never had a mobile contract, didn't have a student overdraft etc

Then, when they graduate and get a job, they have no track record so the amount the amount of credit they will be able to have will be reduced. That's not just credit in the sense of credit cards, loans etc, it's also contracts like rental contracts, mobile phone contracts etc. They may need to buy a car, get a loan for a season ticket, get a credit card or overdraft to buy things/relocate before starting a new job, or even just for the purposes of buying expensive items and having extra consumer protection by using a credit card. They might not need credit in those first few years post university but it is good to have the option.

It's about having a track record. Someone who doesn't have any credit while they are a student not only has 3/4 years less of a record, they also start their record by taking on a huge amount of potential debt when they take on a rental contract, utilities, mobile phone etc all in one go for the first time when they graduate, which puts them at a disadvantage if they do need to borrow large amounts of money before their credit score has caught up eg for a car.

Another easy way to build up their credit score when they are at uni is to sign up for the free credit score checkers and regularly check them. Have a look at MSE for other tips.

I don't think they need a credit card particularly - neither of mine do. What they should have though is a current account with an overdraft facility (preferably not used!), a mobile phone contract and to be on the electoral role at the address the others are listed at. Assuming they're not going to be buying a house for a few years they should at some point aim to have a utility Bill or two in their name once they're working.

But being on the electoral role is probably the most important.

D1 has found it difficult to get accepted even for a 'student' credit card, unfortunately, the bank where she has her student current acct doesn't offer credit cards for students - they don't accept loan and bursary money as 'income'. I think it's a good idea to have one for same reasons as previous posters, but also that buying online is safer with a credit card than with a debit card.

Thanks

Ds rents a flat with pals but is still on the electoral roll here as he's not sure how long he's going to stay there...is that important?

@ssd

Thanks

Ds rents a flat with pals but is still on the electoral roll here as he's not sure how long he's going to stay there...is that important?

As long as his bank account and mobile bill are also at your address it's fine.

Actually students are allowed to be on the electoral roll at both parent and term time address.

His bank account is registered here but his mobile bill is registered at his flat. He is a student but its a private let, full time. Not term time. But its his first rental and he is still registered here to vote. I wonder if he should register at his flat to vote? His flats are a bit dodgy for post, thats why he still gets stuff sent here, thats not online.

Having a good credit score saves you money. It means you can get better rates on loans. While debt is something to generally avoid, mortgages are pretty standard. Plus occasionally, people need things like care and it can make financial sense to buy a better car you have to finance than to buy a cheaper car you can pay in full but might need mor frequent repairs.

A really easy way to build credit is to get a credit card and use it for regular purchases and pay it off in full every month.

Is it worth having a credit card and actually just paying money into it, sort of like a savings account, and to get interest on the balance?

Lots of people get a credit card when they get a job. Unless you really need a credit score at 21, it can wait. Just make sure the overdraft isn’t exceeded and there’s no late payments for utilities etc. When DC work they are responsible for managing a credit card, using Klana and store cards so they build up a good credit score. They will get credit when they have a job so you go from there.

Interest on the balance? What interest? No. Just manage student money and get a cc later. That’s really good enough for most.

Ok thanks

The best way to use a credit card is to think of it as a debit card with lag. You have so many days to pay it off, but set up a direct debit to do just that and you'll build a credit score with little effort.

There are also advantages of using a credit card, especially when buying things online like gig tickets, train tickets, holidays etc. Credit cards have insurances and it's easier to dispute things and get your money back. Plus many credit cards will give you rewards like cash back. They're not evil if you use them sensibly.

They are not evil; but you don’t really need one as a student. Unless you have a job too and more than a student loan.

What @titchy said.

My DDs were on the electoral roll as soon as they were able to be (at home) and use this address for their current/student bank accounts. When their phone contracts came to an end last year that I had always funded, I suggested they took their own out. At £9 and £5 per month, it was hardly big money, but helps to start building their credit score.

We also changed our household credit card to Barclaycard. Normally it's joint for me & DH but Barclaycard offer the facility for upto 4 cards so I added the DDs. It means that I can send them out for shopping or takeaways and they can pay with it. When one needed new glasses, she used that to pay. They know that the second they abuse it, I'll cancel it.

Building a good credit score is important for anyone and everyone. Whilst you have been able to obtain a mortgage prior, your children, who are students will require a good credit score to rent or obtain a mortgage. Any credit product now will look at your credit report, so having a good credit report is essential. A few ideas for building your credit report are: Make sure you are registered on the electoral roll at your current address, if your name is not on the electoral roll, it can make it hard to obtain credit. And once registered you will see a small increase in your credit score.

Check for mistakes on your credit file, even a small mistake can affect your credit score, so regularly check for mistakes.
Pay all your bills on time, this shows lenders that you can manage your finances well.

Pay off your existing debt, Ideally, you should pay off any outstanding debt before applying for new credit. This is because lenders might be hesitant about lending you more if you already have a lot of debt.
Avoid making multiple applications, if you've recently been turned down for credit, it's unwise to apply for another credit card or loan immediately, as multiple applications over a short period of time may suggest to lenders that you're in financial difficulty.

Keep your credit utilisation low. Your credit utilisation is how much of your available credit limit you use. For example, if you have a credit limit of £2,000 and you’ve used £1,000 of that, your credit utilisation is 50%, so you’re using half of your credit limit. Usually, using less of your available credit will be seen positively by lenders, and will increase your credit score. If possible, try to keep your credit utilisation at 25% or lower.

On top of these, you could look at building your credit with a credit building company. For example there's this Portify app that offers two credit building memberships which can help to increase your credit score, and stops you going into the debt you are worried about. Also, once your children are 18 they could also join to start building the credit scores as well. Alongside building your credit, you can track your bills and subscriptions through the app.