Why is My Credit Important?

Your credit history says a lot about you. It demonstrates whether you’ve made paid your bills as agreed or whether you have a history of defaulting on debts.

As a consumer, you’ll find that your credit history can dramatically impact the amount you pay for goods and services. As an example, the below listed table shows the average interest rate for vehicle loan by FICO score:

Understanding My Credit

When you purchase goods or services without immediate payment, you’ve created a debt. To assess the risk of you not repaying the debt, lenders frequently examine your credit history, which contains information on whether or not you've repaid your debts in the past. If you've reliably repaid your debts in the past, you'll find that lenders are more willing to offer you credit at favorable rates.

Generally, lenders review your credit report provided by one of the three major credit reporting agencies - Equifax, Transunion, and Experian. The federal Fair Credit Reporting Act requires each of the nationwide credit reporting agencies to provide you with a free copy of your credit report, at your request, once every 12 months.

Important! There’s only one online authorized source for obtaining your free credit reports—www.annualcreditreport.com— beware of other sites that may look and sound similar but may require you to purchase other services to receive a “free” report.

If you have experienced credit troubles, visit the Federal Trade Commission at www.ftc.gov and download their pamphlet “Credit Repair: How to Help Yourself.” Another useful website is the National Foundation for Credit Counseling at www.nfcc.org.

For more in-depth information on credit, finances, and consumer information, visit the Federal Trade Commission website at www.controlyourcredit.gov.

Credit Scores and Reports

Potential creditors use the information on your credit report to calculate your credit score. Your report includes;

• Personal information including reported employment
• Account information or trade lines
• Inquiries
• Public records information

Establishing Credit

Sometimes people think that no credit is the same as good credit… not always. Establishing a positive credit report can help you in

• qualifying for credit when you need it
• qualifying for lower interest rates (see the impact it can have above)
• being approved to rent an apartment
• landing a job

As you prepare to head off to college or your first job, it is important to begin establishing a good credit record:

• develop a budget and pay all your bills on time.
• don’t apply for credit needlessly and only borrow what you need

A student loan provides funds to pay for your education.  It is a financial obligation just like any other debt you incur. You are responsible for repaying the loan in full, even if you do not complete school, are not employed in your degree field, or were not satisfied with your education experience.

Managing your finances helps you successfully repay your education loan or loans. Plan for repayment now to achieve financial security and well-being in the future.

Read more on keeping loan costs low....

Education beyond high school does have related costs. It is important to develop a budget, and to compare costs and financial aid options for programs that interest you. Plan ahead and make the most of your money.

In high school:

• Get involved in sports, clubs and activities that increase your eligibility for scholarships or special aid.
• Find competitive grants and scholarships you may qualify for, such as the Alaska Performance Scholarship, or the UA Scholars program. Work towards qualifying for them.
• Take the most rigorous courses available. Courses in high school are free, but you have to pay for any remedial courses you need in college. For maximum benefit, take AP classes and exams, or college courses subsidized by your school district to get college credit before you arrive on campus.

While preparing for college (in or out of high school)

• Apply for as many scholarships as possible. Scholarships are gift aid – you don’t have to pay them back.
• If you plan to attend college out of state, consider schools with exchange programs. For example, through the Western Undergraduate Exchange (WUE) you can attend an out-of-state school for 150% of resident tuition, which can be much less than non-resident tuition.
• If you’re still deciding on a career path, research career-specific loans or other programs that offer loan forgiveness or repayment after graduation. Careers that offer such programs include the military, health care, teaching (i.e. Teacher Education Loan or TEACH Grant), fisheries, and other public service fields.

In college:

• Make sure you’re in the right classes. Take placement tests and talk to an advisor before you register for classes. If you haven’t declared a major, talk to academic advisors for several majors you are considering.
• Take enough classes to graduate on time. In most cases, you need to take 15 credits per term to stay on track. Review the required coursework for your program of study with your advisor and calculate how many credits you need to take every semester.
• Try to keep a balance between difficult and easy classes every semester. This way, you are more likely to finish all classes successfully on the first attempt.

Complete the Free Application for Federal Student Aid (FAFSA) as soon as possible after January 1 every year, starting with the year prior to beginning college. It’s easier than it looks – and free help is available.

• Consider accepting work-study aid if it's offered. With work-study, you generally work on campus and can arrange your schedule around your classes.
• If you have to borrow money for college, use low-cost federal loans first; then state loans. Private loans are usually more costly.

Still need more help paying for college?

• Consider a part-time on-campus job. On-campus employers are often more willing to work around your class schedule. Some jobs may even allow you to study during down time, or provide special cost benefits. For example, a resident advisor in a dormitory may get free or reduced housing.
• Buy used books online or from fellow students.
• Your student fees cover the cost of many extracurricular activities and entertainment. For example, don’t spend money off-campus to join a gym if you have free access to the school sports center.
• Don’t be lured in by offers from credit card companies! If you do choose to open an account, pay off the balance in full every month. Being smart with your finances makes a big difference.

For even more ideas, check out College Scholarship ways to save money while in college.