Many students who enter college have had little or no experience with building a good credit history. But having good credit is essential as you begin to fully handle your own finances.

A good credit rating means that you have a sound credit history. Your credit history is an indication of how well you pay back credit purchases like car loans, home mortgages, credit card bills and student loans. When you approach a company about extending you credit, like when you apply for a credit card, the company will obtain your credit report to see if they should risk extending you credit. A credit report will show late payments, missed payments, excessive potential debt, etc. If you have a good credit history, a potential lender may feel he or she can risk granting you additional credit based on your past good track record.

Consequences of default and ways you can avoid it

Building Credit

Creditors are interested in extending credit to people who are likely to repay their debts and avoiding those who are most likely to default on their debts. Here are some things you can do to establish good credit:

As you do these things, you will begin to develop a sound credit history and when you need to have credit extended, you will be more likely to be approved. The key is to start now with the things you can do from the above list and complete the latter steps, like purchasing your own home, when the time is right.                       By Darron S. Allred

Some Facts About Credit History

You may be one of the many students who must borrow money through federally sponsored and private loan programs to help finance an education. Please be aware that these loans are reported to major credit bureaus, so how you handle your educational loans will impact any future credit requests for cars, homes, and credit cards. Also, many employers obtain a credit bureau report before hiring a new employee. That’s why its so important to keep your credit in good standing.

The following provides some basic information on what credit bureaus do and what they do not do:

WHAT IS A CREDIT REPORT?

A credit report is a record of how you’ve paid bills or loans with credit grantors such as stores and banks. Credit grantors use credit reports to determine whether or not you will be extended credit. The report identifies you by information such as your name and address, credit accounts, and payment history. Your credit report also includes public record data, such as bankruptcies, court judgments, and tax liens. If you default on an educational loan, it will appear on your credit report. A list of those companies that have recently requested a copy of your credit report is also included. A credit report does not contain information on arrest records, specific purchases, or medical records.

HOW IS THE GRANTING OF CREDIT DETERMINED?

Your account payment history can determine whether a store, bank, or other lender will grant you credit or a loan. Your credit report, along with other relevant financial information – salary, for instance – provides a basis of information on which a lender determines your ability to take on additional debt. Only creditors, like stores and banks, make the decision to approve or decline a loan. Credit bureaus simply supply the appropriate information.

WHAT ACCOUNTS ARE LISTED IN A CREDIT REPORT?

Most credit grantors report their data to credit bureaus at least monthly:

IF AN ITEM IS PAID OFF, WHY DOES IT STILL APPEAR ON A CREDIT REPORT?

Remember that a lenders credit decision is based on a history of how you’ve paid your bills. That’s why making timely payments works to your advantage.

IF THERE IS AN ERROR ON A CREDIT FILE, HOW CAN IT BE CORRECTED?

If you find an error in your report, please notify the credit bureau immediately. The credit bureau will re-verify the item in question with the creditor at no cost to the consumer. Almost all reinvestigations take less than 30 days. If the credit grantor who originally provided the information disagrees with your challenge, you can write a statement to be included in your credit report.

HOW LONG DOES NEGATIVE INFORMATION APPEAR ON A CREDIT HISTORY?

Most negative information, by law, must be removed from the credit history after seven years. Bankruptcies may remain on your record for ten years.

CREDIT BUREAUS

There are several major credit bureaus, plus hundreds of small local credit reporting agencies. The three major credit bureaus are Equifax, Experian, and Trans Union.  Phone numbers for the agencies in your area are located in the yellow pages of your phone book, under the listing "Credit Reporting Agencies."