Published: 24/01/2022
Following on from last week’s blog, some more information on loans for young people.
If you’re young and have never had a credit card or never paid any household utility bills in your name, then it’s very likely that you have a very poor credit score.
Credit scores are based on your history of financial interactions. If you have paid back debts, including household utility bills, and have not missed payments, then you should have a good credit score.
You’re also less likely to have a fixed residence if you are regularly moving between student housing and your parents' which is another barrier to improving your credit score. Lenders want to see a fixed address that has the tenant registered on the electoral roll.
By registering to vote you confirm that the address you live in and put on the application is your permanent home.
Lenders check your credit score to determine how much of a risk it may be to lend to you. The higher your score, the better your chances are of being approved. If you’re young, a lower score is almost inevitable.
You should check your credit report to see what is holding back your score and what you can do to improve it.
You can start by registering on the electoral roll at your address where you plan to apply for a loan. Secondly, if your landlord includes your bills in the rent, ask if they can put your name down on some of the bills.
Household utility bill payments on a contract appear on credit reports. You could be paying those bills all the time but it might be your landlord's name on the bills, so it would make no difference to your credit score.
You can also build up your credit score by paying back any other debts, including a mobile phone contract or a credit card.
Credit cards are a flexible way to borrow, but obviously you won’t be able to get the amount of money you may get from a loan.
Some banks offer credit cards specifically for students, often with higher rates of interest. They may be more understanding of a young person's circumstances.
There are also credit cards designed for people with bad credit, known as credit builder credit cards. Many young people take them out to help improve their credit score.
Some banks offer student overdrafts while you're studying, and you only pay interest once you graduate. The interest can be expensive, so make sure you have plans in place to pay it back before the 0% interest deal ends.
1Plus1 offer personal loans backed by a guarantor, subject to both the borrower and guarantor meeting our affordability and credit worthiness criteria.
If you think you may be interested in a 1Plus1 Loan, please give us a call on 0330 1200 313 and one of our friendly staff will be more than happy to discuss the process with you, or start your application here.