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Using Credit Wisely

Using Credit Wisely

Your credit score impacts almost every part of your life, including your ability to get a home or car loan, rent an apartment, and even get a job. You should always make your payment obligations on time to ensure a positive credit history.

Credit Reports and Credit Scores
Your credit report includes information about financial accounts you have now or have had in the past. Bankruptcies and overdue child support that are public record will also be included. Credit reports are used by financial institutions to help them decide whether or not to grant you credit.

A credit score is a numerical calculation based on all the information contained in your credit report and ranges from 300 - 900. The median score is 725. You often will hear this referred to as a FICO Score which was developed by the Fair, Isaac, and Company. This score will be used by companies to determine if you are a safe financial risk. The higher your FICO Score, the more likely you will be approved for credit, such as a car loan, at favorable interest rates.

Why Does My Credit Matter?
Some consequences of a poor credit history include:

• Loss of job opportunities. Some employers will check your credit before hiring. High debt levels or a poor payment history could keep you from being offered your dream job.
• Higher interest rates. A low credit score shows that you are a high financial risk, and you will be offered higher interest rates on everything from credit cards to car loans.
• Inability to get a mortgage. Your ability to use credit responsibly and repay creditors on time has a lot to do with how much access to credit you will have in the future. Building a solid credit history gives you more buying power when you need it, and that can be especially valuable when you are buying a home.

Free Credit Reports
You can request a free credit report once a year from each of the three national credit bureaus at www.annualcreditreport.com or by calling 877–322–8228. The three national credit bureaus are listed below:

Equifax P.O. Box 674402 Houston, TX 77267 800-759-5979

Experian P.O. Box 1017 Allen, TX 75013 888-397-3742 or 800-682-7654

Trans Union P.O. Box 390 Springfield, PA 19064 800-888-4213

Bankruptcy Is NOT an Easy Out
Student loans can not be discharged in any chapter of bankruptcy unless you can prove that repaying the loan creates an undue hardship on you or your family. Proving hardship is very rare and usually requires showing that you can’t provide a minimum standard of living for yourself and your dependents. Besides that, your credit report may include the bankruptcy information for up to 10 years, which may impact your ability to obtain future loans.

Credit Cards
Having a credit card for emergencies is fine. Unfortunately, a lunch here, a pair of shoes there, charged to a credit card adds up. If you don’t have the money to purchase the item now, you most likely won’t have it when the credit card payment comes due. Don't spend more on your credit card than you can afford to pay off each month. Carefully budget your money and always pay your credit card bill on time to protect your credit.