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Students: Top mistakes that can ruin your credit score!

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15 Aug 2017

Discount Insurance News - 14.8.16


If you’re heading to university this autumn, you’re bound to be excited about all the new opportunities and experiences you’ll be able to take advantage of.

However, going to university means that you’ll be embarking on a journey which puts more responsibility on your shoulders than before.

Most important of these will be your responsibility to manage your own finances!

Although it may not be at the forefront of your mind, your credit score can be greatly affected by the decisions you make as a student.

Research collected for Telegraph Money by credit checking firm, ClearScore, has revealed the biggest mistakes students make with their money and how these could affect them when applying for mobile phone contracts, credit cards, loans and mortgages.

A low credit score means you are more likely to miss out on the best rates or deals.

The average student has a credit score of 320 which is 15% lower than the national average of 380, according to ClearScore.


Below are the top 5 common mistakes students are at risk of making:


1. Defaulting on payments and County Court Judgments

Over a quarter of the 117,000 students surveyed admitted defaulting on payments including mobile contracts, hire purchase agreements or credit cards.

One way to avoid this happening is to set up a direct debit and this would preferably be set up to pay off the full amount each month in the case of a credit card or loan.

A defaulted payment can result in a lender issuing a County Court Judgment (CCJ) if you consistently fail to repay. CCJs stay on the Register for Judgements, Oder and Fines for 6 years and will damage your credit score.


2. Making too many ‘hard’ searches

The average student has 1.3 ‘hard’ searches on their credit report. Applications for loans, credit cards, mortgages and opening utility accounts including mobile phone contracts are all likely to product a hard search.

Although this mark is created by previous applications for credit, this mark is visible to prospective lenders.

A lender may reject you on the basis you have made too many other applications or been turned down over a short period of time. Many hard searches remain visible for 12 months but debt collection can remain for up to two years.


3. Having outstanding loans

Many students have thousands of pounds’ worth of student loan debt but this is not included on your credit report unless these are pre-1998 and you defaulted.

Nearly a quarter of the students surveyed by ClearScore had a personal loan with the total average ‘short term’ debt of those students being £926.33.


4. Living off your credit card

Young people can get caught up in the excitement of freshers’ week and are more likely to spend beyond their means. Just under 50,000 students had an active credit card and those who did use a card spent an average outstanding debt of 44% of their credit limit.

Lenders take different stances on credit card use. While some prefer you to make minimum payments simply because it’s more profitable for them, others prefer regular spending as long as balances are paid off in full.


5. The utility bill trap

When you live in a shared house, it can be difficult to keep track of who owes what, particularly if each housemate has responsibility for a bill and then has to recoup the others’ share.

48% of students said they were named on utility accounts with housemates and 19% admitted missing payments on joint bills.

While being named on a utility bill with someone else should not mean you are considered ‘financially linked’, having a shared bank account where money for bills is paid will mean you are ‘co-scored’ by agencies.


Try to avoid these top 5 mistakes and you’ll benefit in the future, long after your student days are gone!

Justin Basini, chief executive of ClearScore, said: "Actions that may seem harmless at the time, such as missing or ignoring a minor payment on a shared account, can come back to haunt graduates years after leaving university.

"These mistakes could easily affect their credit scores which in turn can impact everything from taking out a mobile phone contract to renting or buying a property later down the line.

"A better credit score ultimately leads to better deals on credit products and getting a grip on this sooner rather than later will help students and graduates get set up for a more stable financial future."

Students – protect your valuables today with great value Student Contents Insurance! Call 0800 294 4522 for a quick quote today!