10 Things All College Students Should Know About Credit Scores

Even if you've never owned a credit card you have a credit score! Don't be scared though. Here's what to know about credit scores to save your finances.

Whether you like it or not, you have a credit score. It is there, even if you have never checked it. Keeping on top of your score is crucial, and knowing these basic facts for what to know about credit scores can help you in your future.

1. There are three companies that put out credit scores

Equifax, Experian, and TransUnion are all credit-reporting agencies that collect information from creditors and public data. Using this information, they put out credit scores and you are able to check your score for free once a year. It is likely that the scores may differ because while most major creditors give information to all three companies, smaller companies only provide information to one or two companies.

2. The scores can have a major impact on your future

Employers, landlords, and lenders may access your credit score to ensure that you are on top of your finances and are reliable. If you want to make a big purchase or take out any kind of loan or a mortgage, your credit score is a huge determining factor in whether or not you are eligible. However, employers may only check your score with your permission.

3. You have free access to your credit reports

A lot of the info about what to know about credit scores can sound pretty intimidating. But it’s not all bad news! You should know that it’s your right to access your credit report and you can see it for free once a year. Additionally, you can access your reports under certain circumstances, such as cases of identity theft, fraud, adverse action, or unemployment. There are ways to buy your report, but there are a number of ways to access them for free.

4. Negative information will be removed after seven years

Finances can get tough for everyone, and sometimes, these things have a negative effect on your credit score. Fortunately, these things are not permanently on your record. They are only on your credit score for seven years, and this period starts with your worst delinquency. This period of time does not restart if a current agency sells it to another agency.

5. What is on your credit report

Your credit report consists of your personal information (such as your social security number, employer, and current and past addresses), your credit history (including payment history, kinds of debt you have, a public-record credit information), and a list of those who have viewed your report in the past two years (also known as the inquiries section).

6. There are many credit scoring models

There are several credit scoring models. However, the FICO model is the most common one and is used in most decisions when it comes to lending decisions. It was started by the Fair Isaac Corporation and ranges from 300 to 850. Most lenders want your score to be around 680, especially when you are in the process of buying a house.

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7. You may dispute information on your report

If there is inaccurate or outdated information on your credit score or report, you have the right to dispute it. Credit agencies must take action within 30 days of your reporting the information. To file a dispute, submit, in writing, your name, address, the facts about what you are disputing, and why it is being disputed. Include the report with the facts circled. Provide original documents that back you up.

8. What influences your credit score

Payment history is the biggest influence on your credit score, weighing in at about 35%. Making payments consistently and on time will increase your score, while making late payments hurt your score. One late payment will not destroy you but do not make it a habit. Avoid maxing out your credit, and have a wide variety of credit in circulation.

9. Your credit score is only a part of lending decisions

While your credit score is used in lending decisions, it is not the only thing that is factored in, so do not beat yourself up if you found out what to know about credit scores a little too late. Many lenders also look at income and debt-to-income ratios, so as long as these things are in good standing, you have a chance. Your credit score does not take these into consideration, and they are significant to lenders.

10. How to build good credit

While you may have bank accounts and credit cards under your parents’ names, having bank accounts and credit cards in your name help you build your credit history. Have your parents co-sign if needed, especially if their credit is good. Diversify your credit, but do not apply for too many forms in a short amount of time. Pay off your credit card amounts in full each month to avoid debt.