Credit

Credit is one's ability to obtain good or services before actually paying for them. You having credit is based on the trust that you will make payments in the future. If you have honored your financial commitments in the past you will be deemed creditworthy. Your credit score is a number from 300-850 that lets financial institutions know how how much risk is associated with lending to you. Your score is a snapshot of your risk at a particular point in time. Your score is based on the information and entries on your credit report at that very moment in time. Your score could change countless times in any given day, or it could remain stagnant for long period of time. It all depends on the stream of information flowing into your credit report.  

Benefits of Good Credit

Good credit means you are more likely to get a loan approved. Beyond that, you'll enjoy:

• Better loan offers (rates, terms, and conditions)

• Lower interest rates on credit cards

• Faster credit approvals

• Increased leasing and rental options

• Reduced security deposits

• Reduced premiums on auto, home, renter, and life insurance policies

Your Credit Report

You should be pulling your credit report annually at annualcreditreport.com, there you can pull your free credit report each year. You are able to get one free credit report from each of the three credit reporting agencies each year. So, technically you can pull one out every four months from a different reporting agency, or you can pull all three reports out at one time. 

The three credit reporting agencies are:

• Equifax | www.equifax.com | 800-685-1111

• Transunion | www.transunion.com | 800-888-4213

• Experian | www.experian.com | 888-397-3742

What's in a FICO Credit Score?

A credit sore, or FICO Score, is based on five factors, none of which considers employment status, income, or professions. Be aware of these factors because even though you will be a healthcare professional, a good credit score is not guaranteed.

Payment History - 35%

This is the largest portion of your score. Delinquent payments can have a negative impact on scoring, but consistent on-time payments will raise a credit score. A few late payments are not an automatic score-killer, and having no late payments doesn't mean you'll get a perfect score. Your payment history is just one piece of information that is used to calculate your credit score. 

What To Do

Pay all bills on time. Paying bills late by 30 days or more can dent your scores — and the later you pay, the greater the damage. Set up auto-pay or calendar reminders so you don’t miss due dates. You might also want to ask creditors to move your due dates so they better align with when you get paid.

As a student, be proactive about paying on time. Set up automatic withdrawal, or schedule online bill-pay servicers with your bank so that a recurring monthly payments is never late.

Amount Owed - 30%

Having credit accounts and owing money on them does not necessarily mean you are a high-risk borrower with a low FICO Score. However, if you are using a lot of your available credit, this may indicate that you are overextended—and banks can interpret this to mean that you are at a higher risk of defaulting.

What To Do

Experts recommend using no more than 30% of your available credit. People with the highest scores tend to use much less than that. To keep your credit utilization low, you can try things like setting balance alerts or making extra payments during the month.

The good news is that score damage from having high credit utilization can be reversed. Once you pay a high balance down and the creditor reports it to the credit bureaus, the damage disappears.

During school, make a focused effort to avoid increasing the balance on these cards.

Length of Credit History - 15%

In general, a longer credit history will increase your FICO Scores. However, even people who haven't been using credit for long may have high FICO Scores, depending on how the rest of their credit report looks.

Your FICO Scores take into account:

• How long your credit accounts have been established, including the age of your oldest account, the age of your newest account and an average age of all your accounts

• How long specific credit accounts have been established

• How long it has been since you used certain accounts

What To Do

Keep old accounts open unless there is a compelling reason to close them, such as an annual fee on a card you no longer use. You might be able to help yourself a little in this category by becoming an authorized user on an old account with an excellent payment record.

Avoid opening new lings of credit and take care of your old lines of credit (do not close them if you don't have to). do not closed them if you don't have to). Closed accounts eventually fall off your report, and this could hurt your history.

New Credit - 10%

When you shop for credit, inquiries remain on your credit report for two years, although FICO Scores only consider inquiries from the last 12 months. Your FICO® Scores look at how many new accounts you have by type of account. They also may look at how many of your accounts are new accounts. Research shows that opening several credit accounts in a short amount of time represents a greater risk—especially for people who don't have a long credit history. If you can avoid it, try not to open too many accounts too rapidly.

When you're checking out at your favorite store, if the salesperson asks if you would like to apply for the store credit card, just say no.

Credit Mix - 10%

FICO Scores will consider your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans.The more types of credit your have the better. A good credit mix is pretty impactful to your score if you have limited to no credit. Keep in mind your new credit category and don't open too many different types of credit all at once.

Having too much of one thing - such as lines of revolving credit (i.e. credit cards) - is never good for your credit, so be aware of how many credit cards you have.

Most of this information was provided by myFICO.com. Visit their site for more information about your credit score.

How Student Loans Affect Your Credit

Student loans do affect your credit score in one way or another. Check out these articles to see how your student loans can positively and negatively affect your credit score.

How Do Student Loans Affect Your Credit Score? - NerdWallet

Do Student Loans Affect Your Credit? - Credit.com

How Student Loans Affect Your Credit - US News & World Report

Do Student Loans Affect My Credit Score? - Experian