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What is a Credit Score (and Why Should You Care)?

December 27th, 2007 admin

Your Credit Affects Your Future

Chances are you don’t know your credit score. In fact, a lot of students our age don’t even know what a credit score is—or how it can affect their future. Scroll down through this credit score quick guide to make sure you’re up on your credit info:

What is a Credit Score?
A credit score is a three-digit number (ranging from 340 to 850) that helps define your credit history and reliability—basically, the higher your credit score, the more trust you receive from those who look at your score.

Who Looks at Credit Scores?
This is the “why you should care” bit—your credit score matters to a lot of people. Take a look at these examples:

  • Loan Companies. Whether you’re taking out a car loan or a private student loan (remember to take out federal ones first—they have better terms!), lenders look at your credit score to help determine the interest rate to charge you—or if they will even give you a loan! If you have a high score, you will almost definitely be qualified and get a lower rate. (Another way to get a lower rate is to have someone with a good credit score co-sign your loan). Even mattress stores check your credit score before they’ll finance a mattress for you!
  • Credit Card Companies. If you apply for a credit card, a low credit score (or no credit score) could mean you get denied. My first card (which I got my freshman year) was a student credit card I got through my bank.
  • Cell Phone Companies. When Mom and Dad decide it’s time for you to get your own cell plan, your carrier of choice will probably run a credit check on you. A low credit score could mean higher rates or, once again, a denial!
  • Insurance Companies. Car insurance companies use a lot of factors to calculate your rate. Age and car model are two of them, but guess what? They also check your credit score. Same rules apply: a higher credit score usually means a lower rate!
  • Landlords/Apartment Complexes. If you’re renting off-campus, you will probably need a good credit score to rent an apartment. A low credit score—or no credit score at all—could mean you’ll have to find someone to co-sign your lease.

How to Get Your Credit Report
Want to see your credit report? The federal government created a law that allows you to get a copy of your credit report for free once every twelve months. Just go to www.annualcreditreport.com to get started. You should request your credit score from all three of these companies: Experian, TransUnion, and Equifax since your credit history is tracked separately by each company and may therefore have different information on each report. If you want to see your actual credit score, you will have to pay a small fee.

The most common score is called your “FICO” score that is calculated by a company named Fair Isaac & Co. and combines your credit information from all three credit reporting agencies. In 2005, the three agencies created their own combination credit score called “VantageScore” which calculates a scale of 500 to 990.

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11 Comments Add your own

  • 1. Tyler  |  December 30th, 2007 at 7:25 pm

    Wow, I didn’t realize that having no credit score was so bad. I am going to have to do a bit more research on how to get an apartment next year (currently in the dorm). Are credit cards the only way to acquire credit?

  • 2. Jamie  |  January 2nd, 2008 at 10:07 am

    Tyler: There are a couple of ways to build your credit besides getting a credit card. I’ll be posting some details about how to build your credit next week or the week after.

    As for getting an apartment, you might have to get a co-signer. Even if you’ve had a credit card for a couple years, some apartments have income requirements, too.

  • 3. Pay for College Blog - Ti&hellip  |  January 3rd, 2008 at 9:31 am

    […] Teaching your kids about credit now will help them make responsible decisions as they start to take on financial independence.  A recent post at our student blog, Surviving College Life, tells students what a credit score is, and why they should care about it. […]

  • 4. Surviving College Life &r&hellip  |  January 3rd, 2008 at 10:46 am

    […] What is a Credit Score (and Why Should You Care)? […]

  • 5. Pay for College Blog &raq&hellip  |  January 7th, 2008 at 11:05 am

    […] Teaching your kids about credit now will help them make responsible decisions as they start to take on financial independence. A recent post at our student blog, Surviving College Life, tells students what a credit score is, and why they should care about it. […]

  • 6. Surviving College Life &r&hellip  |  January 29th, 2008 at 11:10 am

    […] Fees & Bills 35. Understand what your credit score is, and keep it healthy! It will help you save money later when you’re looking for low interest […]

  • 7. Surviving College Life &r&hellip  |  January 31st, 2008 at 10:38 am

    […] that you know what a credit score is, it’s time to figure out how you can make yours stronger. The nice thing about credit scores […]

  • 8. Surviving College Life &r&hellip  |  July 3rd, 2008 at 11:22 am

    […] on time, every month. Remember, late payments can lower your credit score AND cost you an arm and a leg in late fees, so do whatever it takes to make your payments on time. […]

  • 9. Pay for College Blog &raq&hellip  |  April 14th, 2009 at 5:02 pm

    […] Now more than ever our children need to understand the importance of mitigating debt and building a good credit score (our sister site, Surviving College Life, has an article targeted to teens & students about what a credit score is.) […]

  • 10. Pay for College Blog - Ti&hellip  |  April 14th, 2009 at 5:03 pm

    […] Now more than ever our children need to understand the importance of mitigating debt and building a good credit score (our sister site, Surviving College Life, has an article targeted to teens & students about what a credit score is.) […]

  • 11. Surviving College Life &r&hellip  |  August 26th, 2010 at 12:10 pm

    […] What is a Credit Score (and Why Should You Care?) – The basics of how credit works, and why it matters to your life […]

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