Do you know the difference between a credit report and a credit score? Your credit report is made up of the last 7 to 10 years of credit history. This includes the times you borrowed for a car, cell phone, mortgage, etc. It tracks how well you paid your bills each month and if you have too much credit versus income.
Your credit score takes all of your credit history into account and gives you a grade or a “score”. Scores can range from 300 to 850 with a higher score being better. There are three different reporting agencies that each give you their own score, Experian, Equifax and Transunion. A “good FICO credit score” would be in the range of 670-739. Your score is generated by looking at the credit history to see your payment history, the debt you have, how long you have used credit, inquiries into your credit by others and the mix of credit you hold.
Why is a good credit score important? When you need to borrow, you want the best interest rates you can get to avoid paying more than you have to. Companies look at your credit in determining whether or not to give you a loan or the rate you will get on that loan. Things like car insurance rates are influenced by your credit score and many employers will pull credit scores to decide if they want to hire you. Landlords may also pull your credit score to decide if they want to rent to you and how much to charge you for a security deposit.
How to responsibly use credit – If you do decide to take out a credit card as a college student, be sure you keep your limit low so you do not over-extend your ability to pay the balance back. Also, be sure you pay on time every month. Paying that bill on time every month is very important and you have to know if you are ready for that responsibility before taking on any type of debt.
Our best advice is to keep your credit score as good as you can so you have more options available to you once you graduate from college.
Annualcreditreport.com – This website allows you to receive free credit reports from each credit reporting company once per year. It is wise to check every 4 months or so to make sure someone has not been using credit in your name that you do not know about.