CREDIT CAN GREATLY IMPACT YOUR FUTURE:
Depending on how you handle your lines of credit, the decisions you make during college can have a positive or negative impact on your financial future. The decisions you make today will reflect on your credit report for the next 7-10 years. There are a number of people who look at your credit report for a variety of reasons including:
- To purchase home, car, or any other large purchase
- To rent an apartment or house
- To start a cell phone plan
- Some employers access credit reports before hiring a new employee; bad credit is a red flag to employers and could ultimately cost you the job.
HOW TO START ESTABLISHING CREDIT WHILE IN SCHOOL:
Check your credit report. You'll first want to see what, if anything, lenders are saying about you.
Establish checking and savings accounts. Here's a basic step that's sometimes overlooked by people seeking credit: lenders see bank accounts as a sign of stability.
Have Bills in Your Name. Did you know that if you are renting an apartment, having at least one of the utilities in your name will help build credit? If you have a cell phone, but your parents still pay for it, ask to have your name added to the account.
Piggyback on someone else's good credit. The fastest way to establish a credit history can be to "borrow" another's record, either by being added to a credit card as a joint account holder or by getting someone to co-sign a loan for you.
Apply for a Credit Card or a Secured Card. If you can't get a regular credit card, apply for the secured version. These require you to deposit money with a lender; your credit limit is usually equal to the deposit.
WHAT IS A FICO SCORE?
Every day, thousands of U.S. lenders use FICO Scores to make more well-informed credit-granting decisions. But what does that mean for you? And why is it important to understand how lenders use them?
Click here for a breakdown of how your FICO score is determined.
STRATEGIES FOR GOOD CREDIT:
Always pay your bills on time. This is the single best way you can show creditors that you’ll be responsible with your money.
Build up your savings account. It’s good to make regular deposits, no matter how small. While this won’t appear on your credit report, lenders like to see a consistent savings pattern.
Be particular about your credit cards and loans. Apply only for the ones you really want and keep them for a long time. Each time you apply for credit, your credit score takes a small hit. To maintain good credit, you should open new lines of credit sparingly.
Maintain a low balance. It’s better for your credit score to maintain a low balance on one card and pay it off each month than to have no balance at all!
Watch your credit report. Just because you do everything right with your credit doesn’t mean everyone else will. Errors could end up on your credit report leading to a drop in your credit score. Identity theft and credit card fraud can also lead to inaccurate information on your credit report. Checking your credit report throughout the year lets you detect these mistakes sooner so you can correct them and maintain a good credit score.
WHAT INFORMATION IS INCLUDED IN YOUR CREDIT REPORT?
A credit report is simply a record of your personal financial transactions or credit history for the last 7-10 years. This report is used to decide whether to approve you for a line of credit such as an application for a loan, credit card, job, or housing.
Personal information. Compiled from credit applications you've filled out, this information normally includes your name, current and recent addresses, Social Security Number, date of birth, and current and previous employers.
Credit history. The bulk of your credit report consists of details about credit accounts that were opened in your name or that list you as an authorized user (such as a spouse's credit card). Account details, which are supplied by creditors with which you have an account, include the date the account was opened, the credit limit or amount of the loan, the payment terms, the balance, and a history that shows whether or not you've paid the account on time.
Credit Report Inquiries. Credit reporting agencies record an inquiry whenever your credit report is shown to another party, such as a lender, service provider, landlord, or insurer. Inquiries remain on your credit report for up to two years.
Public records. Matters of public record obtained from government sources such as courts of law -- including liens, bankruptcies, and overdue child support -- may appear on your credit report. Most public record information stays on your credit report for 7 years.
UNDERSTANDING YOUR CREDIT REPORT:
Credit reports are the foundation of your FICO Scores, but what are they exactly? Watch this video to find out which information on your credit reports does and doesn't impact your scores. Plus, see how checking your credit reports for accuracy can help you protect against potential identity theft.
What is Not Included in Your Credit Report?
A credit report does not include information about your checking or savings accounts, bankruptcies that are more than 10 years old, charged-off or debts placed for collection that are more than seven years old, gender, ethnicity, religion, political affiliation, medical history, or criminal records.
Who Can Look at Your Credit Report?
Anyone with what is considered a permissible purpose can look at your report. These companies, groups, and individuals include:
- Potential lenders
- Insurance companies
- Employers and potential employers (usually only with your written consent)
- Companies you allow to monitor your credit report for signs of identity theft
- Some groups considering your application for a government license or benefit
- A state or local child support enforcement agency
- Any government agency (although they may be allowed to view only certain portions)
- Someone who uses your credit report to provide a product or service you have requested
- Someone that has your written authorization to obtain your credit report
ACCESSING YOUR CREDIT REPORT:
Credit reports should be checked at least once a year to ensure accuracy and prevent identity fraud. You may access one credit report for free from each of the major bureaus annually (for a total of three free credit reports per year). An easy website to use when retrieving your credit report is www.annualcreditreport.com. Reports may also be requested from one of the three major reporting agencies:
Information Service Center
PO Box 740241
Atlanta, GA 30374
Click here to view a sample credit report from Equifax, once there click the view sample button.
National Consumer Assistance Center
PO Box 949
Allen, TX 75013-0949
Click here to view a sample credit report from Experian.
2 Baldwin Place
P.O Box 1000
Chester, PA 19022
Click here to view a sample credit report from Transunion.