Debt Management - Credit
WHY IS GOOD CREDIT SO IMPORTANT?
Access to student loans has become increasingly important to many students for financing their professional graduate educations. And more and more, GOOD CREDIT determines who can borrow and who cannot.
Federal Stafford loans satisfy the borrowing needs of most students, and at this time they are not credit-based. To borrow in excess of the annual Stafford limits, however, you must apply for a private or 'alternative' loan, and these loans require that you be "credit ready" or "creditworthy". Without good credit and access to alternative student loans, some students may quite possibly not be able to afford a career in the health professions.
WHAT IS GOOD/BAD CREDIT?
Good credit requires a continuous pattern of prompt payments, no current payment delinquencies, and no negative items such as collections, repossessions or foreclosures. A good credit history means that you are "creditworthy".
Some students have not yet established a credit history, and, for educational loans, this is equal to good credit. It is known as "credit-ready". Future health service professionals are considered to be very good credit risks.
Bad credit, on the other hand, reflects delinquent or slow payments, current delinquencies or other negative items. The credit criteria used to review/approve student loans can include the following: (1) absence of negative credit; (2) no bankruptcies, foreclosures, repossessions, charge-offs, or open judgments; (3) no prior educational loan defaults unless paid in full or making satisfactory progress in repayment; and (4) absence of excessive past due accounts, i.e., no 30-, 60-, or 90-day delinquencies on consumer loans or revolving charge accounts within the past two years.
Since lenders are required to report student loans to at least one credit bureau, your credit could be bad because of failure to keep deferments current or to make required payments. Bad credit will not only deny you access to loans for education, you will not be able to finance a car, a home, a practice, or much of anything else. Your credit rating must be protected at all costs, and that means making wise decisions and knowing where problems might arise.
If you feel there is even a slight chance that you may have a credit problem, you should discuss the situation with your financial aid officer and immediately take whatever steps necessary to clear your record.
AVOID THE LURE OF PLASTIC!
Credit cards are useful only when used with discretion. Their use is so often abused with disastrous consequences that a few words of caution are in order:
- Avoid using credit cards as much as possible; open a checking account and budget yourself instead. DO NOT USE CREDIT CARDS TO EXTEND YOUR STUDENT BUDGET!
- If you do accept credit, accept only one card and try to pay the amount owed in full each month.
- Make sure the one you choose offers a low interest rate in case you do have to carry a balance
- You're in trouble if you:
- can make only the minimum payment
- are always at your limit
- accept more cards to borrow more.
Call Consumer Credit Counseling Service at 1-800-388-2227 to get your finances back on track and to educate yourself on handling personal finances.
CHECKING YOUR CREDIT
Before applying for "alternative" educational loans, you should request a copy of your credit report from a local Credit Reporting Agency. The report should be reviewed carefully with particular attention paid to the number of accounts, account balances, and the timely manner in which monthly payments have been made. Should the report reveal any derogatory information, you should contact the reporting credit bureau and creditor(s) to see if any items are in error or can be corrected. Inaccurate reporting is the most frequent complaint with credit reports.
If you are denied credit, ask the financial institution that obtained the credit report to give you a copy or obtain one yourself from the Credit Reporting Agency (CRA). Once you have reviewed the report, call or write the CRA stating what is inaccurate. If reinvestigating by the CRA doesn't yield results, you must file in 100 words or less why the report is inaccurate. According to the Federal Fair Credit Reporting Act, the CRA must inform you of the results of the reinvestigation within 30 days.
CREDIT REPORTING AGENCIES
There are three major Credit Reporting Agencies and hundreds of smaller local agencies. You can find information for the agencies in your area in the Yellow Pages of your phone book under the listing "Credit Reporting Agencies". The three major agencies are these:
Equifax1-800-685-1111 www.equifax.com
TransUnion1-800-888-4213 www.transunion.com
Experian1-888-397-3742 www.experian.com (formerly TRW)
FOR MORE INFORMATION
For more information about credit bureaus, or resolving credit problems, contact the Federal Trade Commission(202) 326-2222 or our Office, Student Financial Planning, if you have serious credit problems that will impact your ability to finance your professional education.
Before enrolling, it is strongly recommended that you request a copy of your credit report from a credit bureau. It is important to pay close attention to the information on this report such as account balances, monthly payments, etc. Financing your education may depend upon a good credit history, if you need alternative loan monies. The Office of Financial Aid does not have the resources to make up any financial aid shortfall created because you are ineligible for alternative aid.
