As A-level results are released on Thursday, thousands of students are preparing to start university life this weekend and over the coming weeks. Between freshers' week, flatshares, and stretching their student loan, credit scores are often the last thing on their minds. However, new research from Compare the Market reveals a common gap in financial understanding before they arrive on campus.
Key findings on student credit misconceptions
The data shows that over half of students (52%) did not realise that bills-included rent does not help build a credit history. This is because utility accounts are typically held in the landlord's name rather than the tenants'. Additionally, 83% of students were unclear on how student loans affect credit scores, with over a quarter (27%) believing they are treated the same way as credit card debt. In reality, student loans do not appear on credit scores.
Expert advice: a student credit checklist
As this year's school leavers prepare for university, Compare the Market's personal finance expert, Sajni Shah, has put together a student credit checklist with practical fixes. The checklist includes keeping at least one small recurring bill, like a utility bill, in your own name to start building a payment history. Registering to vote can also help improve your credit score, as it allows lenders to verify your identity and address.
Shah advises students to stay within their interest-free overdraft limit and avoid letting it run at the maximum for long stretches, as lenders look more favourably on a managed facility than constant maxed-out borrowing. She also recommends avoiding multiple credit applications in a short space of time, as each hard credit check can knock your score slightly, so space out applications for cards or accounts. Paying bills on time, every time, is crucial, as even small missed payments, like a phone bill, can show up on a credit file and affect your score.
Why understanding credit matters for students
Sajni Shah says: "It's easy to see why so many students assume they're building a credit history while at university. They're renting, managing bills and taking on more financial responsibility than ever before. The reality is that not every financial commitment helps build a credit profile in the way people expect."
"Taking the time to understand what does and doesn't contribute to your credit history can help avoid surprises later when applying for credit, a mortgage or even a mobile phone contract."
The findings highlight the importance of financial education for students as they transition to independent living. By following the checklist, students can take proactive steps to build a positive credit history, which will be beneficial when they apply for loans, mortgages, or other financial products in the future.
