Understanding Credit
The Financial Aid Office encourages all students to monitor their credit because credit affects so many aspects of our lives. As part of the Fair Credit Reporting Act you can access a free credit report online from each nationwide credit bureau and nationwide specialty consumer reporting agency: Annual Credit Report. Any other site will charge you for the credit report. You are also entitled to a free credit report if
- a person has taken adverse action against you because of information in your credit file
- you are the victim of identity theft and place a fraud alert on your file
- your file contains inaccurate information as result of fraud
- you are on public assistance
- you are unemployed but expect to be employed within 60 days
You have the right to request your credit score, but you will have to pay for it. You have the right to dispute incomplete or inaccurate information. Consumer reporting agencies must correct or delete it. However, they may continue to report verified and correct information. Consumer reporting agencies may not report outdated information, and access to your file is limited. You must give your consent for employers to have access to your credit report. You can opt out of unsolicited prescreened offers of credit and insurance that you get based on information in your credit report by calling 1-888-567-8688. You may seek damages from violators and identity thieves. Active military personnel have additional rights.
It is important to review your credit report even if you haven't experienced credit problems in the past or feel that you don't have enough history to warrant a credit report. You may be unaware of errors or there may be ways to improve your credit report.
The GradPLUS Loan program is available to students without adverse credit history. Adverse credit history can include
- debt delinquencies of 90 days or more
- default determination
- bankruptcy discharge
- foreclosure
- repossession
- tax lien
- wage garnishment
- write-off of a federal student aid debt
Lack of credit history is not considered adverse credit.
Terms to be familiar with when reviewing your credit report.
Collections.
Failure to make payment on a delinquent or defaulted account may result in the creditor or lender contacting an agency or having your account moved into a department that specializes in collecting payment from delinquent accounts. This negatively affects your credit score.
Credit Inquires.
Requests for your credit report and credit score may or may not affect your credit score. A hard inquiry is a request by a creditor/lender to view your credit report and credit score; this request has been authorized by you, the potential borrower, and takes place when you want a new credit card or are interested in a car loan. Hard inquiries affect your credit score. A soft inquiry is a request from prospective employers to view your credit report, or inquiries made by current creditors and companies that want to offer you a new credit card. Soft inquires do not affect your credit score.
Credit Report.
A summary of information contained an individual's credit history. Creditors use this information to evaluate the likelihood that the individual will repay future loans. A credit report is created from payment information and credit account information that creditors/lenders report to the three authorized credit-reporting agencies. A person begins to build credit by having a credit card, consumer loan, student loan, or some form of personal credit.
Credit Score.
A quick, accurate, consistent, and objective method that uses statistical models to determine a borrower's future credit risk. The higher the credit score the more likely it is that a borrower will repay a future loan. Credit scores range from 300 to 850, but each lender/creditor determines its cutoff points and underwriting criteria for potential borrowers. Your credit score is not included with your annual free credit report, but can be purchased from each of the three national credit-reporting agencies. Your credit score can vary from agency to agency.
Default.
Nonpayment of a loan or credit card balance. The lender, guaranty agency, or creditor may require full payment of the debt, in addition to associated fees and fines. Federal Stafford Loans are put in default status after 270 days of nonpayment. Nonpayment status will negatively affect your credit score.
Delinquency.
Failure to make payment on a due/past due account, typically characterized in thirty day increments of lateness. For example 30 days delinquent, 60 days delinquent, etc. This status will negatively affect your credit score.
Installment Accounts.
An account where an amount is borrowed and paid back to the lender creditor in set amounts over a set period of time, with either a fixed or variable interest rate. Examples include mortgage, school, and car loans
Revolving Accounts.
Accounts that allow you to add and carry forward debt until you reach a predetermined maximum amount. Interest accrues on the balance at a specified time in the billing cycle. Examples of revolving accounts include credit cards, retail charge accounts, finance accounts, and personal lines of credit. Fees may be associated with the use of the account.
This information is only a small portion of what is available to consumers to understand their credit. Please visit the Federal Trade Commission's website on credit for more in-depth information.
Useful information on credit and its impact can also be found on these websites:
YouCanDealWithIt.com and AccessLex.org Student Resources.