It’s that time of year again where lots of freshers are eagerly and perhaps, anxiously preparing to start their new course at university. I have such happy (crazy) memories of my time as a student in Manchester. I did well socially and academically but not so well financially (good job I was using my Maths degree to become a teacher and not an accountant!).
My Experience of Student Debt
As soon, as I secured a place on my chosen degree course, banks loved me and all wanted to offer me money. Despite having a Grant, a Student Loan and eventually a job, I managed to use all the money I was loaned. Each year the bank would extend my overdraft and my credit card limit. If I had my time again, I would realise that an overdraft should be kept for emergencies and that it’s important to pay off your overdraft when you can. I began to see my account very differently to how I view it now. If my balance said £480 overdrawn and I had a £500 overdraft, then I would see that as £20 in credit to me. It’s crazy when I look back, but that’s the way I saw it.
I was useless with credit cards too. I didn’t even make any worthwhile purchases with them. A lot of the time I would use my credit card as a cash card, for which I would then be charged heavily. That is such a waste of money and makes me cringe now that I have the wonderful benefit of hindsight.
So my first advice to students would be to get into the least amount of debt that you can (I realise that’s easier said than done). Always remember that the money banks are lending to you is purely that, a loan, a loan that will need to be paid back.
I remember coming to the end of my course and getting the letter about my Student Overdraft ending. I didn’t know how I was going to pay it all off in one go and felt very worried.
One phone call to the bank later and my overdraft had been extended again, this time I had a Graduate Credit Card, Graduate Loan and a Graduate Overdraft.
I remember reading in an Adrian Mole book, how he hated all banks as he had no money, and in the next diary entry stating that he loved them as they had extended his overdraft again and this was how I felt. Now, I wish I had saved my new wages and started clearing the debt straight away post uni.
How to Avoid Student Debt
The Importance of a Good Credit Rating
After your graduation, you might want to travel, buy a house, get married, have children, who knows? But I do know that the majority of these things will be easier or only impossible to do if you have a good credit rating. My mobile phone is still in my partner’s name as when I left uni, my credit rating wasn’t good enough to get a contract of my own.
Five Ways to Improve Your Credit Rating
The good news is, that even if your bad credit rating was unavoidable, there are things you can do to improve it.
- The first thing you need to do is check your credit rating to find out what is affecting your score. The three main credit reference agencies to check are: Experian, Equifax and Callcredit.
- Pay all of your repayments on time. When creditors can see that you are working to pay off the debt, this works in your favour.
- Make sure you are on the electoral roll.
- Cancel all unused credit cards, debts and accounts.
- The way I cleared my debt and increased my credit rating was to consolidate all my existing debt into one affordable loan, which I could easily make the repayments of. Talk to a bank, such as TSB or an advice agency, such as Citizen’s Advice to help find the right solution for you.
What are your tips for avoiding student debt or increasing your credit rating?
In association with TSB