Understanding Your Credit Score
When you start out as a college student, you’re faced with a lot of new information at once. You’re taking classes that are more challenging than anything you’ve taken before, you’re having to keep track of your finances and translate all of that financial aid documentation into some form of English. Even so, nothing can be more confusing for young people than a little thing known as credit.
Ah, credit. You need it to get by, but it’s generally annoying, wouldn’t you agree? However, the sooner you become familiar with this pesky little necessity, the better you will feel and more confident you will be in your financial decisions.
What Is A Credit Report?
A credit report is a document that others can access when they want to find out whether or not you would be a reliable borrower or not. For instance, when you go into your bank to get a loan, they will pull up your credit report in order to make an evaluation on whether or not you could be trusted.
The credit report contains information about your place of residence, your job and how and when you pay your bills. Other information such as whether you’ve filed bankruptcy in the past or have been sued may also be included. Creditors and lenders both will send information about your paying habits to the three main credit bureaus, Experian, Equifax and TransUnion so others can assess your creditworthiness.
Other information included in the report may be your current account balance on credit cards and loans, your credit limit and if you’ve ever missed a payment.
What Is a Credit Score?
A credit score is like the numerical version of your credit report. It is basically a quick and easy way for creditors and lenders to see if you are creditworthy. This number ranges from 300 to 850 and the higher your score is, the less of a risk you are to creditors and the more likely you are to receive credit with ease. While you can obtain a free copy of your credit report each year, you will need to purchase your credit score.
What Will A Low Credit Score Do?
Having a low credit score is definitely not a positive thing and it can cause you quite a few difficulties until you can get the number back up again. For instance, with a low credit score, applying for a credit card may be tricky as your interest rate may be very high or you may be denied the card altogether. Having a low credit score can also make it difficult to rent an apartment or get a mortgage on a home. It can make it hard to get a loan from the bank. Basically, any credit-oriented service—like a cell phone—will be difficult to get if you do not have a high enough credit score.
What Will A High Credit Score Do?
Well, having a good or excellent credit score will do for you exactly the opposite what a low one will do. You will be able to obtain more credit much more easily and creditors and lenders will feel much more comfortable loaning you money, as you have obviously been a reliable borrower in the past. You had to have been in order to get that high credit score. You can think of a high credit score as a merit badge, if you will. It’s an indicator to anyone out there you may potentially borrow from in the future that you are not a risk and undoubtedly creditworthy.