Credit, College, and Beyond

In the last lunch workshop we learned about credit. Going into it, I wasn’t very knowledgeable on the topic so I was interested in learning more about it. I come to find out that credit is VERY important and everyone needs to be familiar with it. The first question I had was well what IS credit?

By definition it is: a contractual agreement between a lender and a borrower in which the borrower assumes something of value, and agrees to repay the lender on a future date. However that can be confusing, so basically in a different way of saying it, credit is: borrowed money that you can use to purchase things you need when you need them and then repay the funds back at an agreed on time.

I stress the importance of credit to people my age because; we are all going to college soon , therefore living on our own, perhaps getting student loans, and applying for credit cards. All of those things coincide with your credit score in one way or another.

So how does credit even work?

Great question! When you apply for a credit (example: card or credit loan), it’s the lenders discretion to decide if you meet the expectations or are a good candidate for receiving the loan. Their decision is based greatly on your credit history. If you have poor credit history and display late payments, then you are less likely to be approved for the loan or line of credit.

It’s not just credit card companies that are looking at your credit history though, its employers, insurance companies, landlords, etc. It is necessary for them to know your past payment history and spending tendencies to determine if you are responsible in that aspect. Chances are that if you were always late on payments in the past that you may indeed still carry that bad habit in the future.

One of the most important things on your credit report is your credit score which is a reflection of your credit report as a whole. This is a big factor in determining whether you are granted credit or not. The number includes several factors which are

- Payment History - 35%
- Outstanding Debt - 30%
- Credit History Length - 15%
- New Credit Applications - 10%
- Your Credit Mix - 10%

How can I build up my score?

This is a common question people often ask to get on track of if they have bad credit how to get BACK on track.

-- Make payments on TIME! --- You can open to accounts to help with this.

-- Make payments that are higher than the minimum required---people have then tendency to just pay what they have to but if it is possible pay a little bit more than the minimum, it helps you pay it off faster and looks good on your report!

-- Make sure you understand the basics of credit and its scoring

-- Apply for a SECURED credit card

There are many sites, and people that can help you better understand credit or get you started on the right track. You would be surprised at even little things that you don’t think are that big of a deal, but are actually a big impact!

GOOD LUCK!
--Solana :)