FINANCIAL LITERACY
Debt & Credit Management
When debt piles up, it can significantly impact future financial plans. Understand the difference between good debt and bad debt and learn the value of having a good credit rating.
Build your credit score
Your credit score, a number between 300 and 900, predicts how likely you are to pay your bills on time. This number drives the approval of credit extensions (credit cards, loans and lines of credit) and the interest rate you pay on those extensions. When a credit score is calculated, these factors are considered:
Pay all your bills on time. Paying late, or having your account sent to a collection agency, has a negative impact on your credit score. A good record of on-time payments will help boost your credit score.
When you miss a payment on a loan, most creditors assign a status of delinquent (no minimum payment within 30 days or more) for some time before considering it in default. A loan will usually go into default when successive payments have been missed. You can consider delinquency the grace period before a loan defaults.
Try not to run your balances up to your credit limit. Aim for balances under 30 percent. Balances above 50 percent of your credit limits harm your credit. Keeping your account balances below 75% of your available credit may help your score.
Avoid applying for credit unless you have a genuine need for a new account. Too many inquiries in a short period of time can be interpreted as a sign that you are having financial difficulties.
Having a longer history on your credit accounts earns you more points, so avoid closing your accounts if you may need them in the future. A good credit history is built over time.
A healthy credit profile has a mix of credit accounts and loans.
Student loans affect your credit score and credit report
Keep your loans in good standing while you study and prepare early to repay your loans to protect your financial future.