A new world of university life is shortly set to open up for thousands of teenagers.
Most new students realise they’ll leave university with a loan they’ll spend years having to pay back once they’ve made it into the world of work.
But new research shows that new graduates will face average debt levels over a third of the average outstanding mortgage.
By the time they start paying back their loans – maintenance and tuition fees – their debts will be well in excess of £41,000, according to The Money Charity, which is 35% of the average outstanding mortgage (£117,162).
And how you manage any credit you have now can affect your chance of getting credit in the future.
It’s not like when this writer was a student, when not only did you not need a loan or tuition fees, but you actually received grants from the council to help you!
The average debt for the graduates who entered repayment this year was £24,640, up from £21,170 in 2015. The figures have tripled since 2003, mainly due to rising accommodation costs, higher loans, and the gradual rise of tuition fees.
And with the maximum tuition fees rising from £3,465 to £9,000 next year, loan costs are only likely to increase.
Here are five simple tips for students to keep their credit rating in shape:
- Many students will live in shared houses, and split utility and other bills. Your credit history can only be linked to other people if you have a financial link with them. Paying rent together doesn’t count, but having multiple names credit agreements like utility bills may link you financially.
- Managing overdrafts, credit cards and mobile phone contracts you have responsibly can help maintain a healthy credit report.
- Even if you’re living at your parents’ home, it’s important to register to vote, and give that exact address when you apply for credit.
- Try not to be tempted to skip or delay your monthly repayments if you can, as your credit report can show you if you’ve missed some payments on cards or loans you have – and they stay on your credit report for six years.
- Try not to go over your overdraft limit, if you have one, and try to keep an eye on what you are spending! Always speak to your bank if you are struggling.
Experian also has a Credit Guide for Students and Young People, aimed at helping students & graduates understand how to use credit wisely to get the things they want in life.
(Blog post updated 16 August 2016, earlier version 18 May 2015)