OMA Encourages Students & Young People to Get Smart About Credit + Tips on Managing Money Better

Last week Online Mortgage Advisor launched a campaign to teach young people about the implications of debt.  In an age where credit cards and loans are so readily available and there is increasing pressure on young people to have the latest gadgets, clothes etc, debt is increasing.  but without secure financial education, young people may not understand the future repercussions of their current borrowing.

A recent survey by the Money Advice Service revealed that 43% of students are using their overdraft, 12% have signed up to a credit card, and 2% are using extra loans to top up their student loan.  The situation is even worse for those not at university.  The Young People and Credit report found that nearly a third of 16-24 year olds have financial debts of more than 40% of their income, owing £2,989 on average.

Getting into debt can have a negative impact on the future, such as making it more difficult, and more expensive, to obtain a mortgage.  As part of the Get Smart About Credit initiative, OMA have launched a great tool which reveals how much money students will save if they have a good credit rating, offers tips on how to improve their credit file now, and advice on how to save money if they want to avoid debt or start to save to buy a home while they're at university.  You can find the tool below, or for the fuller picture visit the OMA website.

Use the full app here: Credit Awareness Campaign

The calculator allows young people to input their age, predicted starting salary and how much they may have saved for a deposit, then works out the best rate available for a mortgage. To highlight the impact historic credit events can have on your mortgage options the calculator then shows the worst mortgage rate available.  The difference can be huge.

Director of Online Mortgage Advisor, Pete Mugleston says

"We want to ensure young people are armed with the tools and information if they decide they need to take out a credit card or loan. Our interactive mortgage calculator will resonate with them and lead them to make informed choices regarding their finances. ... it’s clear more needs to be done to help young people realise the potential damaging effects of getting into debt."

Here are the OMA's tips on how to manage your money, and your credit, better:

1. Don’t completely avoid credit, otherwise you won't have a credit file for lenders to make decisions on.  It's good to sign up to a credit card with a small balance which you pay off each month.

2. Avoid payday loans.  They could heavily impact your ability to borrow for a mortgage or to get a good rate.

3. Be sensible.  Only borrow what you can afford to pay back, and keep your outgoings and expenditure in check.

4. Have no spend days every week.  Use the food in your fridge and cupboard, walk rather than using a car or public transport, and plan free activities for the day.

5. Use cash rather than cards.  Take a set amount of cash out at the beginning of the week (e.g. £50) and keep an eye on your spending.

6. Get a job.  A few hours a week could be the difference between getting into debt and staying out of it.  It can be great experience too, and even fun!  This is a good time of year to get temporary jobs so look and ask around.

7. Limit your nights out.  Big nights out can be a huge drain on your finances, so set a limit of once or twice a week and do something at home instead.  Eating, drinking, films etc will all be cheaper at home.

8. Ask for help.  If you do get into debt or wonder how to manage, seek advice from your university, your bank, the Citizens Advice Bureau or a debt management charity such as StepChange (never pay for debt advice or assistance).

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