ROT Lending

Loans and finance advice.

Should Students have Credit Cards?

Credit cards are a form of debt and therefore it could be argued that students should not take them out as they will already be getting into a lot of debt with their loan. However, there are a lot of pros and cons of owning a credit card and these can apply to students as well as anyone else. It is wise to have a full understanding of student loans, credit cards and the specific student before deciding whether they should have a credit card or not.

Student loans

It is important to remember that a student loan is not like other types of loans. It does not have to start being repaid until after the student graduates and repayments are means tested, so they only start once the graduate is earning above a certain salary. It will also be written off after thirty years, even if nothing has been repaid. Lastly it is paid through the tax code and so the graduate does not have to think about their repayments as they are made automatically and they do not have the budget to make sure that they can afford them as it comes out before they get their pay. There is also no risk that they will forget and not pay. Therefore, the loan is quite different to any other type of loan and there is really no need for them to have to worry about it.

Credit cards

A credit card allows you to buy things and then pay for them later. After a month you will receive a statement showing all of the things that you have bought and you will have a choice to either repay it in full at no charge or repay a small minimum and pay interest to keep the outstanding balance on the card. Credit cards do have some advantages in that they are more secure than debit cards when you are shopping online as they have better fraud protection and they offer insurance which means that if you do not get the items that you paid for or there is a problem with them and they cannot be sent back; you will be able to get your money back through the card company. You also get that interest free credit until the bill comes which can be useful if you are waiting to be paid or to get the next instalment of your loan.

Of course, the cards can get really expensive if you leave them unpaid for a long time. By just paying off the minimum it will take you a long time to clear the debt as very little of the actual balance is cleared and the payment mainly just covers the interest. This can mean that it can get expensive. As students often have no or very little income then it could be hard for them to afford to repay the debt as well. They might have to only repay the minimum because they do not have the money to repay the rest.

Should students have cards?

If cards are used sensibly, to buy things that would have been bought anyway but delaying paying for them or making the payments more secure then there is nothing wring with this. However, if the cards are used as an extra income and only the minimum repayment is made then these are not good. This is the same for anyone that has a card though – whether they are a student or not. The cards need to be used carefully, you should not buy more than you normally would and it is really important to make sure that you will be able to pay off the full balance each month. Setting up a direct debit to do this can be the easiest way to make sure that it happens.

So, if you are a parent and you are worried about your child, who is a student, having a credit card, then you may not need to be. It all depends on how well the card is used. If it is repaid in full and used to give security as well as convenience then this should be fine. However, if it is used to buy treats that would not otherwise have been bought and it is not paid off in full then this is where there could be a problem. This is because the debt will be expensive and the student will struggle to find the money to repay it until they graduate and start work. It can be wise for parents to chat to their children about money and how to be wise with regards to both borrowing and spending. Borrowing should not be feared but it needs to be done carefully and the borrower needs to stay in control of the borrowing rather than letting it control them.

Should I get a Loan to Improve my Credit Score?

Improving our credit score can be really important especially if we want to rent a property, get a mortgage or take out some other sort of borrowing. There are lots of reasons though, why our credit report might not be as good as it could be. It could be that we are self-employed or have a low income. It could be that we have had debts in the past or a CCJ. It could be that we are not staying on top of our debts or that we have never been in debt at all. If the last is true, then you may feel that if you get a loan and then repay it, it could show that you are less of a risk to lend to.

Problems with getting a loan

Although it could seem that getting a loan via the likes of and showing you can repay it is a great way to prove you are reliable it can be a risk. Firstly, if you have a poor credit record then you may not have many loans available to you. Lenders see you as a risk and so will charge you a lot of money for the loan and so you have to decide whether you think it is worth paying all that money. You also have to think hard about the risk. By taking a loan you are taking a risk that you may not be able to repay it. You may feel extremely confident that you will be able to repay it but you never know what might happen. There may be a problem and you may need money and it may leave your short in repaying the loan.

It is also hard to know what influence that loan might have on a lender. They may feel that you are more at risk as you had to borrow money, particularly if it was a loan that did not require a credit check. They may not see the fact that you repaid it as a positive but just look at the negative side; that you needed to borrow the money. This may depend on the type of loan as if you manage to get a credit card or store card then repay the full balance each month, this would be seen differently compared to you getting a payday loan.

Other alternatives

There are other things that you can do in order to improve your credit rating. It is important to start by making sure that your credit report is correct. It is sometimes possible that there is incorrect information on there which is making it look a lot worse than it should. So, if there is a problem you can get it corrected and then your credit report will look a lot better.

You can also improve it in other ways. For example, if you have bills in your household, such as utilities which your name is not on, but they are paid up to date, then get your name added to them. This will then show on your credit report and it will illustrate that you have responsibility for a bills which get paid on time.

Alternatively, if you are jointly named on things with someone who has a poor credit report, CCJ’s or unpaid debts then this could work against you. So, if this is the case then see whether you can have their name taken off the bill or it is changed to being just in their name.

Increasing your income or having a more secure job could also help you to get a better credit score. This can be quite tricky but it will advantage you in other ways as well and so it can be something which is worth considering.


So it can be a good idea to be really sure before you take out a loan to improve your credit rating. Make sure that the credit record is correct first and think about whether there are alternative things that you can do which will improve things more than getting a loan. You also need to think really carefully about whether a loan will really give the right message and if it actually will improve your credit score. Lastly, you will need to think about whether taking a loan is too risky. It will be something that will make your credit record worse if you cannot repay it and therefore you need to be extremely careful when deciding whether to take one out. Make sure that you do not make a decision too quickly as you could end up regretting it. It can be worth talking it over with a few people and doing more research about improving your credit score before deciding what might be the best thing that you could do to improve it.