Going to university can be a rite of passage, and for many people, it offers life experience as much as a degree. However, all that experience can come at a price, and if you don't manage your finances effectively, it could have long-term consequences.
Indeed, new research from Amigo found that more than 16,000 people were unable to get on the property ladder last year due to their poor credit score – 5% of all applicants – and those who had embarked on higher education were 10% more likely to be rejected than those with A-Levels alone.
Not only that, but 76% of first-time buyers admitted that they'd been turned down by at least one provider because of their shabby credit history, and although most went on to be successful with other providers, the difficulties that they face – particularly graduates – are clear.
The figures also highlight a lapse in understanding when it comes to the credit scoring system and the factors that influence it. For example, common reasons for being turned down include lapsing into unauthorised overdrafts or having no credit history whatsoever, and even the late payment of a bill dating back years can be enough to warrant a rejection.
Unfortunately, a rejection can be the beginning of a vicious cycle: each mortgage rejection can damage an applicant's credit score even further, which will make it harder to be approved in the future. As a result, those who end up applying to several lenders could seriously hamper their prospects of getting on the property ladder, and those who have a poor credit score from poor money management at university – or worse, no score at all – will be at an instant disadvantage.
"Owning your own home is an aspiration many people have, but actually getting on the property ladder is becoming more and more unachievable," said Glen Crawford, CEO at Amigo Loans. "Ensuring people are aware of what can affect their chances has never been so important, as this can make the difference between having the key to your dream property and being declined for a mortgage.
"What many people don't realise is that having no credit history can be just as damaging as having missed payments on your record, which is why it's paramount that people begin using credit responsibly at the earliest possible stage."
University is meant to be an enjoyable experience, but don't let all the frivolity get in the way of money management. Most student bank accounts offer interest-free overdrafts, so try to stick within this limit rather than dipping into the unauthorised section, and absolutely never miss a bill payment – even if it's only a few pounds, it could stay on your credit history for years, and could be a key barrier to homeownership.
Remember, too, the importance of actually building a credit history. Again, most banks will offer competitive credit cards specifically designed for students, and while you of course don't want to build up unnecessary debt, making a few purchases each month and clearing the balance in full when the statement arrives could be a great way to build up your score and prove your credit-worthiness.
Student life is almost inextricably linked with higher levels of debt, but don't let it ruin your chances of homeownership. Stay on the ball when it comes to your finances, and if you think your credit score could use a bit of work, get the lowdown with a credit check provider (such as Experian) and read our guide for some top tips to improve your rating.
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