Do you comprehend that your financial conclusions today move your credit score later?
An individual’s credit journey begins at university. From managing rent payments to utility bills and stationery payments, a student engages with financial management for the first time. You may also use options like student loans, overdrafts, and credit cards to ease up your lifestyle and grab the best opportunities.
Thus, if you play money responsibly, address essential bill payments timely and regulate unnecessary expenses, you can build a great foundation for your credit score. You may benefit from this during and after the university life. Moreover, having a sound credit history helps you achieve goals like mortgage and car finance.
Alternatively, if your spending exceeds income and you run into debt, you pave the way for an unhealthy credit score. It may lead to constant struggles in achieving your dreams. It slows down everything and creates a long opening between you and your economic goals.
The blog stresses the importance of building a good credit history. It also discusses how a healthy credit score helps students avoid potential obstacles. Let’s analyse the basics.
What does a credit score mean?
A credit score is a numerical explanation of your creditworthiness of your credit history. It includes information like- payment history, amounts owed, loan terms, and types of credit. It ranges from 721 to 999 and splits into good and bad credit scores. Credit scores below 721 are known as low credit scores, and individuals with scores exceeding 800 are known as individuals with good credit scores.
5 reasons a Healthy Credit score proves Helpful for Students
If you want to approach lenders and get favourable quotes for your needs, building a credit history may help. It grants you more choices than individuals with poor credit history. Moreover, financing emergencies with limited cash at hand becomes easier. With a decent credit history, you may be eligible for instant credit with affordable payments. There are other benefits of having a healthy credit history:
Helps you get an affordable rental
Landlords consider an individual’s affordability by analysing the credit report. If your previous payment history and employment are consistent, you may qualify for affordable rentals. It is because it reveals your responsibility to take care of maintaining payments and other bills.
Additionally, it grants you the power to negotiate the monthly rental. It is ideal if you think the rent is a little high in comparison to the facility provided. What could be better than getting favourable space at low rent?
Assists in opening a student account
Having a student account is critical to receiving money from guardians, maintaining regular transactions, and getting scholarship or benefits transfers. However, many students face rejection in getting one. The reasons could be no income proof, low credit history or no credit history. It is because the bank account provider fails to analyse the financials and management from the available or no credit history thing.
Thus, having a credit history may help you get a student bank account. It will help you manage your finances, track the best ways to keep your debt low and receive other benefits. Moreover, some individuals get offers on opening a student bank account. You may leverage it with having the best credit score.
Getting better interest credit cards
Students depend on credit cards for around 80% of their requirements. It could be about buying a gadget, groceries, paying bills, etc. It is the reason students check different credit cards and the best offers to benefit from. For example- an interest-free credit card can help them buy anything without paying interest by the end of the credit bill term.
However, the scope to find one with low or no credit score gets challenging. Every credit card company requires assurance to get the payments timely. Thus, a healthy credit history gives a glimpse of payment affordability. Therefore, building your credit history may help you prepare for more reasonable interest rates on credit cards.
Moreover, you may benefit from different discounts and other benefits you receive on credit cards.
Get instant funds to finance business needs
Most students wish to be entrepreneurs after graduation. It is an increasing trend among students to set up their business or run a start-up. Many students work on their business ideas during university days only. It grants them enough time to experiment and finalise the product. However, finance is an important part of business. You need it at every small initiative. For example, I plan a business structure and check its viability in the future. They require constant guidance and meeting with experts.
Whether you need more money for product development or finance the planning needs, a credit score is a must. You may struggle to get instant cash from traditional sources. However, with a credit history, you can tap multiple business-related loans. It reveals your past credit management, the risks, and the initiatives you took to improve credit. Thus, you may get the finance immediately for your needs.
However, self-employed struggle to get business loans. It is because of an unreliable income structure. It does not imply that you cannot succeed as a self-employed. It means that you must provide the best proof of repayment with- the number of projects and revenue figures (at least 6 months). If you can give it, you can get a low credit score loan for your needs. You may use it for business and personal purposes altogether.
Grab exciting job opportunities
Employers conduct a credit check and screening to verify the job seeker’s identity. It helps him analyse the present finances and his ability to manage finances. If your credit history reveals pending bill payments, CCJs, defaults and other issues, he may deny the job offer. This is because every employer desires a person who shares the ability to maintain finances. It limits the risk of fraud and theft.
Alternatively, a healthy credit history with well-managed finances and payments reveals creditworthiness. It reveals your discipline towards maintaining payments and consistency. It casts a positive impression on employers. Eventually, he may consider you a suitable match for the vacancy. Also, you should possess skills to crack the interview.
Bottom line
Credit scores are an important mark of your lifestyle as a student. Having a good one helps you qualify for better loans, mortgages and credit cards. Moreover, it assists you in getting the best place to rent and credit cards. Begin building credit score while in university years. It helps you understand your finances better and regulate it. It enables you to ensure discipline payments and reduce unnecessary expenses impacting credit scores.