Does A Student Loan Affect Your UK Credit Score?

Heading to university in the next year or two? Planning your student finances is a big part of studying in the UK, especially if you’re unsure of how student loans, grants, and bursaries will affect your financial future.

Many students wonder if taking out a student loan will affect your credit score in the UK. The good news is that student loans don’t appear on your credit report, so they don’t impact your credit score either.

In this article, we’ll explore the link between student loans and credit scores so you can decide if getting a student loan is the right financing option for you.

What is a credit score?

Your credit score is a number on your credit report that reflects how reliable you are as a borrower. Organisations like banks and mortgage lenders use the information on your credit report to decide whether to offer you credit.

Your credit score helps you understand your creditworthiness. But lenders often take a much broader look at your credit report when deciding whether to lend you money.

Learn more about credit scoring and reports in our credit score FAQs.

Does a student loan appear on your credit score?

No. Your student loan doesn’t appear on your credit report, so it won’t impact your credit score.

However, mortgage lenders might still take your student loan into account when deciding how much you can borrow. That’s because student loans can still show up when lenders perform affordability checks.

Having a student loan won’t necessarily stop you from getting a mortgage, but if you have a substantial amount to pay off, it might affect how much you can borrow. You’ll also need to meet all the other criteria for getting a mortgage.

Why doesn’t a student loan appear on your credit report?

When you repay your UK student loan, it comes directly out of your wages, provided you earn more than the required threshold for your repayment band. So there’s no way you can avoid paying it off. As a result, student loan repayments are no longer shown on your credit report.

If you become self-employed at any point when you have an outstanding student loan, you’ll need to complete the student repayment section of your Self Assessment tax return. If you don’t repay what you owe, you may ultimately receive a county court judgement (CCJ) which will show up on your credit report.

Improving your credit score as a student

While your student loan might not have an impact on your credit score, other financial activities will. So it’s important to know what affects your credit score, and how you can improve your credit score while you’re at uni.

1. Don’t dip into an unarranged overdraft

Lots of student bank accounts come with arranged overdrafts. You can safely dip into an arranged overdraft without incurring fees or worrying about your credit score.

But if you overspend beyond your arranged overdraft, the bank (and future lenders) may penalise you for going into an unarranged overdraft. Unarranged borrowing may show up on your credit report.

2. Be careful with buy-now-pay-later

Lots of buy-now-pay-later (BNPL) schemes target students who typically don’t have the cash to pay for desirable goods upfront. BNPL usage will show up on your credit report, but it won’t necessarily have a negative impact if you make all your repayments on time.

However, if you’re not the most organised person when it comes to making repayments, it may be best to avoid BNPL. If you don’t make repayments on time, you could damage your credit score.

3. Enrol on the electoral roll

If you’re eligible to vote in UK elections, make sure you’re on the electoral roll.

Being on the electoral roll verifies your identity, which reassures future lenders, so most credit reference agencies will give your credit score a boost for registering to vote. Plus, this gives you the opportunity to vote in elections near you.

Alternatives to a student loan

Student loans aren’t suitable for everyone. Whether you believe student loans are haram due to the accumulated interest, or you’re concerned about the impact on future mortgage affordability checks, there are alternative ways to finance your university studies.

• Apply for bursaries and grants. There are lots of bursaries available to students in the UK, which can help you pay for your education. Check out the UCAS guide to scholarships for more information.
• Work part-time to pay for living expenses. If you’re worried about taking out a loan for tuition and living expenses, a part-time job can help you pay for many of the essentials. It can also give you work experience that puts you a step ahead when you graduate.
• Do a degree apprenticeship. Degree apprenticeships are part work, part study. They can help you get a degree for free — and best of all, you’ll actually get paid while you do it. There are limited placements, so use the government’s Find An Apprenticeship tool to see what’s available.
• Live at home while you study. Living at home and going to a local uni can help you save money, so you don’t need a student maintenance loan.
• Take a gap year and save. Saving to go to university beforehand can take some of the financial pressure off. You can even save with friends and family if you set up a rotating savings club.

Planning for university with Bloom Money

Bloom helps you plan for the things that matter most. Our money club app helps you pool funds with friends, so you can all have some cash ready for when you head to uni — whether it’s money for tuition, accommodation, or an emergency pizza fund.

Join Bloom now and start planning for your future.