December 27th, 2007 Jamie
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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Entry Filed under: budget & finances