A good credit score is mandatory in today’s world. Knowing how to improve your credit score is equally important as credit opens the door to new possibilities. You may not always have the money required to fulfil your dreams, however you can still obtain credit as long as you can repay the loan on time.
As students, many of whom have expenses related to college fees and tuition. A degree in the UK can cost parents up to 20,000 pounds a year on average. When living expenses are added to this equation, the total cost can appear to be quite large. It can be quite beneficial to know how to improve your credit score.
What are Student Loans?
A student loan is designed to help students pay for post-secondary education and the fees associated with it such as tuition, books, other supplies and living expenses. Different from other loans, these are effectively low-interest loans where the repayment of the loan does not have to be completed while the student is still in the process of finishing his education.
In the UK, student loans are sponsored mainly by the Student Loans Company (SLC). The SLC is a non-profit public company that provides student loans. It is owned by the government’s department for education and is responsible for providing loans to students and collecting loan repayments.
What are the advantages of Student Loans?
Cheap and affordable
Repayments can be deferred if the income of the student falls below the threshold set by the government for that financial year.
No repayments are necessary
If you do not manage to get employment after graduating, the payment can be deferred. However, the interest on the principal amount continues to accumulate. The loan is cancelled in case of fatal injury or if the borrower becomes permanently unable to work.
More time is given before defaulting on the loan
Most private school loans are defaulted on as soon as the student misses a payment. Student loans do offer some flexibility on repayment.
Students can focus on academics
The sheer thought of having to repay the loan can make students overwork themselves which could result in a poor performance academically. A student loan gives students the ability to focus on their goals and worry about finances later.
How to improve your Credit Score in the UK?
To avail the best student loans, you need to have a good credit score. This will guarantee that you get rock bottom interest rates that will result in money saved for the future. Here are a few ways for you to follow before applying for a student loan.
Become a user on your parent’s account
If your parent has good credit, your credit will get a boost. This credit boost comes with fewer risks since the primary account holder will be able to monitor your spending. Becoming an authorised user of a parent’s account has long been a popular choice for students aiming to build good credit.
Build credit through credit cards
Paying money required for your credit card regularly allows you to attain a level of confidence and responsibility as clearing your credit card bills on time goes a long way in improving a credit score.
Use your credit card for smaller purchases
Don’t use your credit card on expensive purchases. Racking up large bills on your credit card makes it harder for you if you are not able to repay them on time. This non-payment results in a significant reduction of your credit score.
Getting a steady source of income
Getting a job with decent pay is an important step as this could be a means of paying for your expenses. Lending institutions and banks tend to take this in a very positive manner.
Keeping a low credit utilisation
The term credit utilisation refers to the percentage you use of your credit limit. This indicates how much credit you use in a single month. Usually, a lower percentage will be seen positively by companies, these companies will increase your score as a reward. For first time credit card holders, it is essential to keep your credit card utilisation below 25%.
Proof of a permanent place of residence
Your place of residence gives the bank a sense of stability. Doing something as simple as getting your name on the electoral roll of the place you stay in can help improve your credit score.