Many people worry that taking out a student loan will affect their credit score. This can be particularly concerning if you have no other way of funding your tuition fees and accommodation whilst you’re studying. Good financial management can be essential when it comes to making sure your time at university is successful. Financial worries can make it harder for you to focus on your studies and get the grades that you want. If you have been worried about student loans affecting your credit score, we’ll give you all the information that you need right now.
Your student loan and credit rating
Your student loan will not appear on your credit report. This should put your mind at rest if you have been worrying about getting access to credit during or after university.
However, your credit score can still be affected if you take out other forms of credit whilst you’re at uni and fail to deal with your debts properly. If you can’t make the repayments on credit cards and other borrowing on time, you may be left with a less-than-perfect credit score when the time comes to leave uni.
What exactly is a credit score?
A credit score is a number on your credit report which gives lenders a good idea of how reliable you are when it comes to borrowing. Making repayments on time can help you maintain a good credit score, but missed payments can have a negative impact on it.
If your credit score falls to a low number, you may find it very hard to get access to credit.
Even if you can still get credit with a low credit score, you may only be offered loans and credit cards with very high interest rates.
Can student loans appear during other checks?
Some lenders might take your student loan into account when they are deciding how much to lend you. Student loans can show up when affordability checks are carried out, especially when you’re applying for things like mortgages.
Can a student loan stop me from getting a mortgage?
A student loan won’t necessarily stop you getting a mortgage. You may only be able to borrow a smaller amount than you would like if you still have lots of your student loan to pay off. There are other criteria you will need to meet too if you want to get a mortgage.
Why don’t student loans appear on credit reports?
When you repay a student loan in the UK, these repayments will be taken out of your wages before you receive them as long as you are earning over a certain amount. This means you can’t avoid paying off your student loan if you are over the threshold. This is why student loan repayments don’t appear on credit reports anymore.
If you are self-employed rather than employed directly by an employer, you will have to fill in the student repayment part of your tax return. If you don’t make your repayments, you could be handed a county court judgement. This will appear on your credit report.
How can I improve my credit score while I’m at university?
There are many steps that you can take to maintain a good credit score or improve it whilst you’re studying. These include avoiding falling into an unarranged overdraft. If you have an arranged overdraft limit and go over this, this is known as an unarranged overdraft. Heading into an unarranged overdraft can have a big impact on your credit score. Avoid entering into buy now pay later agreements if you think there’s a chance you won’t be able to make the repayments on time. Missed or late payments can also have a negative impact on your score. Putting yourself on the electoral roll might also help if you want to boost your credit score. Joining the electoral roll allows you to verify your identity and address, and it can help you convince lenders you want to borrow from in future to help you.
Can I avoid getting a student loan?
Even if you don’t have lots of financial support from your family, there may still be things you can do if you want to get through university without applying for a student loan. Some people take on part-time jobs to avoid getting into debt at uni. You might also find that there are grants and bursaries available that will help you fund your studies. You could also take a gap year and save whilst you work or live at home during university to make savings if your family are happy to help. A degree apprenticeship where you spend part of your time working and the rest studying may also be an option.
Other things you need to know about student loans
It’s very important to make sure the Student Loans Company has your current contact details so they can get in touch with you. They’ll also need your current bank details in case you’re due a refund. You will normally be put on a repayment plan, but you can make voluntary repayments if you want to. Just make sure you can afford what you are agreeing to. Voluntary repayments aren’t refundable. You should also tell the SLC if you’re leaving the UK for over three months so they can ensure you’re still paying the right amounts towards your loan.
Your loan may be written off after a certain amount of time and you haven’t been able to repay in full. Some people have their loans written off after 25 or 30 years, whilst others aren’t expected to pay anything once they reach 65 years of age. Taking out a student loan won’t affect your credit rating, but lenders may take an existing loan into account when they’re deciding whether to lend to you or how much they are willing to lend.
If you are worried about non-student loan debt affecting your credit score during university, try to borrow as little as possible and always make the repayments on time.
