Financial credit is part of the fabric of American life. Since the first Diner’s Club card came out in 1950 and the Higher Education Act of 1965 introduced federal financial aid programs, credit cards, car loans, mortgages, and student loans have rapidly become commonplace. From gas to groceries, appliances to apps, education to entertainment, and our lives are fueled by purchases we make with credit. As a student, your use of credit can play a major factor in your future finances. Handle credit well and you’ll be able to enjoy the convenience of purchasing items you need throughout your life with good interest rates and easy approval. Handle it poorly and you could be buried under a mountain of debt with lenders denying your credit applications and creditors asking for their money back.
We’re going to define credit and give you steps to check your credit history, manage your credit score, and put yourself in the best position to succeed financially by managing your credit. Okay, first off, what is credit? Simply stated, it is borrowing money to pay for something with the requirement that you have to pay it back – often with additional interest charges and if you’ve borrowed money from a bank, credit union or any other legitimate institution for lending, all of those credit accounts are compiled in one very important document known as your Credit Report. Better yet, it’s easy to access. You can grab a free report at www.Annualcreditreport.Com. There are two very important reasons to check your credit report. By checking your credit report, you can ensure your accounts are accurate.
Your credit report information can be reviewed by lenders, landlords, insurance companies, employers, and utility providers. So you want to make sure what they review is a correct representation of your credit history. Checking your credit report is a part of protecting your identity. College students are frequently a target for identity theft. By annually checking your credit report, you can see if there are any fraudulent accounts taken out in your name and challenge those accounts. There is another reason the information on your credit report is so important; it is used to compile your credit score. The information on your report is compiled by the three major credit reporting agencies, Equifax, Experian, and the Trans Union. All three report a score, but the credit agencies differ slightly on how they calculate your credit score. Just like your grade point average helps quantify your academic performance so other schools and employers can gauge your academic success, your credit score is a 3 digit number that lenders use to gauge your financial trustworthiness.
You can find your credit score through a number of websites that work directly with credit reporting agencies. Once you have your score in hand, what does it mean? Credit scores, also known as FICO Scores, range from 300 to 850. A score above 780 is considered very good while anything under 600 is considered fair to bad. If you have a good track record of paying your bills on time, then your score is probably pretty good. But if you’ve missed payments or don’t have much experience paying bills, your score will be lower because you haven’t earned the trust of lenders. Keep a good credit score and you may: Enjoy lower insurance premiums, Never be denied apartment rentals based on your financial history, Know that an employer’s evaluation of you will not be tarnished based on credit, Be confident once you are ready to finance a car or a home knowing that your interest rate could be much lower, which could save you thousands of dollars in your lifetime.