The Building Blocks of Good Credit

credit-scoreIf you’re headed off to college for the first time, you may have never given any thought to your credit score or how it affects loans you apply for. You might not even know what a credit score really is. But as you venture closer to being an independent adult, it’s vital that you understand the basics of building good credit.

What is a credit score?

Your credit score is a number calculated by credit reporting companies based on a number of factors. Any time you open a credit account (a credit card, car loan, private student loan, etc.) it is reported to the credit reporting companies. If you’re a responsible credit user (meaning you don’t have huge outstanding balances and pay your bills on time), it will have a positive impact on your credit score.

If you don’t pay bills on time and rack up a huge amount of debt, it can be a red flag where credit is concerned. All of this data (and more) goes into figuring your credit score. And just like those college quizzes you’re going to take, the higher the score, the better!

Why does it matter?

Higher credit scores show lenders that you are more likely to repay the money they give you. That means you will get lower interest rates on loans and you’ll pay less money out of your pocket over time. Higher scores also help you get approved for new credit without needing your parent as a co-signer (someone who also assumes responsibility for your loan in the event that you can’t repay it). Building good credit now will pay off down the road when you’re buying your first car or applying for a mortgage.

So what does all of this mean when you’re trying to pay for college? Credit is NOT a factor if you’re applying for most federal student loans. (Federal Direct PLUS loans will require no history of major negative credit factors such as a bankruptcy.) Private loans, however, usually DO have a credit factor. If you or your parents are applying for a loan like those offered by your credit union and Credit Union Student Choice, your credit score will help determine your approval and interest rate.

Where can I check out my credit?

Don’t fall for those catchy commercials that promise free credit scores and reports. Most will end up charging you for services you can receive free from each of the three credit reporting companies at While you won’t receive your actual score for free, you can receive a full list of items from your credit history. And you can get your actual score for a small fee, which may be worth it if you’ve never checked it before. The same site offers information about understanding your credit report too.

If you want to learn more about establishing credit, check out this video from iGrad. It’s never too soon to start building positive credit!


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