Wednesday, 2 October 2013

Managing your finances at University

University is an exciting time – but it can also be a daunting one. The decisions you make while a student can shape the rest of your life. For the most part, this is positive – the friends you meet, the clubs and societies you join and the small matter of the degree you get! Others elements of university life can be more intimidating. One particularly daunting prospect that can have a long-lasting impact on your future…managing your money.

I must warn you that no less than a third of students admit to being financially unprepared for university living – and two thirds want to find out more about managing their finances. This is understandable. For many students, including myself, university will be the first time they’ve had to juggle what can be some significant income, once student loans, part-time and vacation work and savings are factored in, with some equally hefty – and important – outgoings, including accommodation, food, heating – and maybe a few quiet evenings out...

What’s more, university is also the first time that many people will have access to credit –9 out of 10 students had some form of credit outside their student loan, mainly an overdraft or credit card. The temptation is to see this as free money – we’ve all heard tales of students who have maxed out their credit cards within the first term and had to live on porridge or potatoes for the rest of the year.

It hopefully goes without saying that spending your entire overdraft and hitting the plastic hard is a bad idea. But borrowing as a student is nothing to be afraid of – it isn’t inherently a bad thing. Interest rates offered while an undergraduate are usually the lowest you will ever receive in life. Used wisely, credit can be an invaluable way to spread the cost of living, especially if you only work during the holidays.

The key thing to remember is that how you use credit now will shape your financial future. Whatever you borrow, you’ll need to pay back, which will chip away at your graduate income, so only spend what you need. You should also make sure you’re clear on how things like borrowing limits and interest-free overdrafts will change once you leave university.

What’s more, transgressions like missed payments or an exceeded overdraft limit will remain on your credit file for six years. Your credit file is what potential lenders look at to see whether you’re a reliable borrower. As six years is well after your graduation, missed payments could hamper you when you’re at the point in life where you’re looking to buy a car, go travelling or even get a mortgage.

To help, Experian have written a special guide for students, available to download at: www.experian.co.uk/students. It’s designed to help you start your professional life in a much stronger position by understanding how to use credit wisely to achieve the things you want in life.

Five top points from the guide are:

1. How it all works
When you start using credit facilities, such as overdrafts, credit cards and even mobile phone contracts, information on how you manage them will appear in your credit report. Your credit report will help lenders access your credit worthiness into the future based on how well you have managed credit over the last six years.

2. Building up a picture
When you apply for credit, your name and address will be checked against the electoral roll so that the lender can be sure that you are who you say you are and live where you say you live. Whatever you do, it is essential you register to vote somewhere, even at your parents’ home, and give that exact address when you apply for credit.

3. Information about other people
Your credit history can only be linked to other people if you have a financial link with them. Paying the rent together doesn’t count, although you will be linked to people you share with if you put multiple names on a credit agreement such as an electricity bill.

4. Think before you borrow
If you are a student, you’ll probably take advantage of one of the special bank accounts on offer many of which include interest-free overdrafts, but remember that you will need to pay the money back when your course ends. Never go over your overdraft limit without permission from your bank. Always speak to your bank if you are struggling.

5. Don’t forget to budget
To build up a good credit history you must make all your payments on time. How you manage any credit you have now will affect your chance of getting credit in the future. So use credit wisely and budget to make sure you don’t spend too much.

Together they should make university a little less daunting when it comes to debt and help you make the most of your time as a student – and beyond.

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  3. I made $20 for each 20 minute survey!

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