Almost every adult in the UK has a credit score produced by a credit rating agency. What can you do to boost it?
A credit score is a numerical representation of a person’s creditworthiness. This is based primarily on reports from credit rating agencies – the three main agencies in the UK are Callcredit, Equifax and Experian. At Future Finance we use Equifax to credit score our student loan applicants.
In order to calculate your credit score, these agencies keep track of your bills, debts and repayments and compile a credit report. Student loans are a part of this process. It’s important to note that the credit report contains a much more detailed explanation of what went into the calculation of your credit score
Why do I need a good credit score?
A credit score is one of the things that lending institutions and other companies such as insurance companies and mobile phone operators use to determine how much risk you pose in terms of meeting your financial obligations. A good credit score means you have a greater chance of being approved for a mortgage, personal loan or credit card. A bad score might mean you are even rejected for a mobile phone contract.
Can my social media accounts affect my credit score?
Given that many students are young and, as such, have not had an opportunity to build a credit score, many lenders are using agencies such as Friendly Score who use social media as a metric for assessing one’s credit score. Social media profiles provide personalised, internationally standard, verifiable data that give lenders a profile of a prospective borrower. To create this profile they would look at variables such as your connections, pages you like, the details you put in such as your education or work history as well as keywords that you use. What does this mean for you? Same as always, just be careful with the information you provide online and think about that 3 am Saturday Night post twice before publishing it ?
How can I see my credit score?
You have the right to write to any of the credit reference agencies and ask for a copy of your credit report, which will cost you £2. Credit rating agencies are closely regulated in the UK by the Information Commissioners Office (ICO). For more information please visit http://ico.org.uk/
Alternatively you can sign up for a trial period with Equifax, which will enable you to see your credit report. As long as you cancel before the trial period ends, this should be free of charge.
How can I improve my credit score?
It’s common for students to have a poor credit score. This is because they have not yet developed a credit history, and, therefore any predictions being made about their ability to meet future financial obligations are less certain.
There are some simple ways to improve your credit score:
- Make your payments on time! This is probably the most important factor that influences your credit score.
- Do you have a credit card? Try to keep the balance as low as possible. If you always have a lot of debt on your credit card it could affect your score negatively.
- Make sure that you are registered to vote on the electoral roll. If you are not eligible to vote in the UK, you can send proof of residency (UK drivers licence, utility bills etc.) to the credit reference agency, and ask them to add a note to verify this.
- Make sure you keep your finances separate from your flatmates if you think they have a poor credit history. Even sharing joint bills together with them can have a potentially negative impact on your credit rating. Consider each taking responsibility for one bill for which you are then responsible.
If you have a bad credit score, you will need to re-build your credit history. This takes time, however, if you follow best practises you are moving in the right direction.
Will my government student loan show up on my credit score?
Anyone who started uni after 1998 – when the “income contingent” student loans were first introduced – will not have information about their student loans show up on their credit score. The Student Loans Company does not share this information with credit reference agencies.
Will my Future Finance loan show up on my credit score?
Yes, by making regular repayments to your Future Finance loan, you will be improving your credit score.
Warning: only borrow the money you need! Warning: Late repayment can affect your creditworthiness rating. For help, go to moneyadviceservices.org.uk
If you have any questions about Future Finance student loans, you can visit our FAQ page or call us on 020 3743 8700