In this day and age, student loan programs are at an all-time high in popularity, in terms of those that receive money from these sources. There are a myriad of reasons for this, from the economic backdrop to the value of college degrees, but the fact remains that student loan programs are flooded with applications each semester from eager students trying to grab any edge they can. Many of these programs depend on your individual credit score, meaning, in basic terms, a reliability rating. Many times, students aren’t even aware of their credit score, or that it is taken into account when applying to loan programs. You’re not helpless, though; there are certain steps to take to become aware and improve your credit score, and boost your chances at a loan.
Knowing Your Credit Score
When you hear the phrase “credit score,” what comes to mind? The most likely answer is a commercial with a catchy jingle, offering to let you know your credit score for free. Before we delve into this, let’s talk in legalese: your credit score does not belong to you. You don’t necessarily have the right to know it for free, and you certainly don’t have the right to know the formula that calculates it. That being said, there are programs, such as the ones you see on TV, that can help you access your credit score. However, you really should only use one of these methods if you already have a credit plan of your own, like a credit card. Take that literally; YOUR OWN means that your parents are not involved in any credit lines you have, because if they are, you’re most likely attached to their credit score.
Assuming you already have a credit line, it’s probably a good idea to take a look at your credit score. If you’ve never missed a payment and sent in all your forms on time, your credit score is probably in good shape. However, if you frequently fall behind on your payments, you may be in a bit of a tight space. College loan programs, after taking a look at this information, will be hesitant to give you access to their funds if you make a habit of paying late.
There are several different types of credit programs, but two of the most basic are the two you should be aware of at this point: installment credit and revolving credit. The latter is the paradigm adopted by credit card companies, which give a minimum limit to be paid over a certain amount of time. Installment plans, such as student loans, are more fixed. The student (read: you), borrows a certain amount of money and pays it back in large chunks until it is totally reimbursed. This runs counter to revolving plans, which have to be cancelled after you pay in full.
How to Improve Your Credit Score
As stated above, most students won’t have that long a credit history to stare at before they go to college. However, it is vital to build up a solid credit score before taking out loans, assuming you have an open line. The best possible thing you can do is get all your payments in on time to any creditors. Simply put, this shows you’re responsible with your money and will boost your credit score among student loan financiers. It’s also important to know that student loans take the length of your credit history into account; if you opened your own line of credit a while ago and consistently pay it off, you are more likely to be rewarded. Student loan programs are a complex animal that require a lot of time and energy. If you know your credit score going in, you will save yourself a lot of headaches and help get the ball rolling on payment plans at a faster clip.
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