Advice

Credit can be in many different forms and  most people throughout their lives are likely to use credit of some sort, this could be through a bank account to a mortgage.

Getting  credit is not wrong as long as it is the correct product for you and your circumstances.

It has become such a part of everyday life within Britain and the rest of the world that it is vital that people have an understanding of the most common types of financial products available and how they work.

Student Bank Accounts

For most students opening a bank account will be their first experience of credit. Opening an account can be a daunting prospect especially with the vast amount of information that a student is bombarded with.

When deciding on the best account for you; remember to shop around don’t just apply for the first one you see.

Although many have headline grabbing rates they are often not available to all students and will be dependent on your year of study and personal circumstances most prominently your credit rating.

The banks are private institutions and therefore have the ability to refuse you an account if they do not think you are commercially viable. So do not assume that you will automatically get an account and the top rate offers available.

If you are refused by one bank this will not automatically mean all the banks
will refuse you so do apply to other institutions (remember however that numerous applications can have an affect on your credit rating).

Most students will often pick the account which gives them the largest interest free overdraft but there are other considerations to look into such as eligibility and interest rates, we have compiled information from the major banks and their Student Bank Accounts

Remember when applying for student bank accounts (and any financial product) to always read the contract thoroughly before signing.

Interest Free Overdrafts

The majority of people have overdraft facilities within their bank accounts. An overdraft is a form of borrowing  that allows you to use money which you don’t actually have. They are often much more flexible and cheaper than other forms of credit and are particularly useful for dealing with short term income problems and/or emergency payments.

Student accounts often come with an interest free overdraft which means that as long as you do not go above your agreed overdraft limit there will be no interest applied on the amount, if you go over the agreed amount however then interest and charges will be applied.

Although the overdraft is interest free you should always check with other charges if any can be applied. 

Remember although they are interest free it is not free money and you will need to pay it back in the future.  Once you graduate from university many student accounts will automatically transfer to another account typically a graduate account many of which do not have an interest free overdraft and have higher charges.

If you have any problems with your account contact the lender in question, who will look to help you in your situation where possible, if there is further problems then contact the Advice Centre.

Credit Rating

Before a lender offers you credit they will consider your ‘credit worthiness’, there a number of factors to this such as age, income, history with the particular lender but normally the most important criteria is a person’s credit rating, which are administered by credit reference agencies such as Experian and Equifax.

Your credit rating will show the lender how likely you are to repay any amounts borrowed on time, if you have a poor credit  history the likelhood is you will either not be able to get the best deals or have to pay more to access them.

Even those with good credit ratings are never guaranteed success in their applications.

You can improve your credit rating through some basic tips:

- Make sure you are on the electoral roll

- Make sure your personal details are correct and inform all relevant parties of any change of address

- Regularly review your credit statement and make sure that all the details on the report are correct and refer to you and no-one else

- Cancel unused accounts and/or cards

- Too many credit applications (particularly rejections) will have a negative impact

- Try where possible to keep up with payments on time.

Remember there is no such thing as a blacklist for credit applications and no one lender’s application process is the same.

For further details regarding credit, how it affects you and your credit rating read the Information Commissioners Office guide Credit Explained