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6.1: Credit

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    Introduction: Financial Health

    Much like our physical and mental health, our financial health is extremely important. When we talk about our overall health, we often neglect the topic of our finances. Financial stress not only affects our mental and physical well-being but also can affect our ability to finish school or gain employment. This chapter will introduce you to tips and strategies to assist you in maintaining your financial health and well-being.

    This chapter focuses on personal finances, but as a college student, financial aid and paying for college are important elements of your financial health. Please see the “College Resources and Policies” chapter for information about how to apply for financial aid including student loans, grants and scholarships.

    We would like to thank the Pennsylvania State Employees Credit Union (PSECU) for providing most of the content in this chapter. PSECU is a credit union with locations around Pennsylvania, including some locations on HACC campuses. To learn more about PSECU, please visit their website at psecu.com.

    Money Management Essentials

    Content provided by PSECU, Pennsylvania State Employees Credit Union.

    A lot of things compete for college students’ attention. Finishing assignments, passing exams, looking for jobs or internships, managing family obligations - the list goes on and on. While these tasks are all important things on which to focus, learning how to manage your personal finances is crucial as well.

    Personal finance is a broad subject made up of many components. We’ll zero in on a few key areas – credit, choosing loans and managing debt responsibly and budgeting. Understanding these money management essentials can help you build a strong financial foundation to support your success now and in the future.

    Image of Credit Score Breakdown

    6.1 Credit

    Many potential lenders, employers, and landlords, among others, will check your credit to determine if you’re a qualified borrower, employee, or tenant. If you don’t know much about credit, you may just cross your fingers and hope for the best when someone asks to check your credit. With so many important things riding on credit, however, students should get informed now.

    What is Credit?

    Everyone talks about “credit,” but it’s rare to hear someone explain what it actually is. Simply put, credit is your ability to borrow money or to buy something without paying in full upfront.

    You may need to utilize credit when making large purchases, like a home or car, which many people don’t have the cash to buy outright. Even if you’re not planning a large purchase, credit will play a vital role in smaller tasks, like applying for a credit card, getting approved for a cell phone plan, or turning on utilities in a new apartment. The better your credit, the more likely lenders or providers are to believe that you’ll pay off your debt in the future and the easier these tasks, among many others, may be for you.

    How Does Someone Check Your Credit?

    Now that you know what credit is, you may be wondering how someone can check it. Typically, when someone says they are going to check your credit they are referring to your credit score and/or your credit report.

    Credit Scores

    Your credit score is a three-digit number that allows whoever is checking to compare you against other potential borrowers. There are many different scoring models, and what is a “good” score can vary between each one. In general, though, a higher score reflects better credit.

    A credit score has five different components. Each component makes up a percentage of the score, as indicated below:

    Credit Reports

    Your credit score is calculated from information in your credit report. In the same way that your school transcript is a record of your academic history, your credit report is a record of your financial history. It gives those who are checking your credit a more in-depth look at what’s behind your credit score.

    Your credit report contains four main sections:

    Can I Check My Own Credit?

    Now that you’re aware of all the people who may inquire about your credit, you may be wondering “Can I check my own credit?”

    The answer is yes. You can and should check your credit on a regular basis. Keeping tabs on your credit not only helps you understand your financial standing, but also can aid you in identifying and stopping fraudulent activity that could be occurring in your name.

    List of Items to Verify on your Credit Report

    How to Access Your Credit Report

    You’re entitled to a free copy of your credit report from each of the three major credit reporting agencies once a year. You can access these free reports by visiting AnnualCreditReport.com’s website.

    When you’re checking your credit report, make sure you’re typing in the correct URL. You’ll have to enter personal information, such as your name, date of birth, and Social Security number, in order to access your report, so you want to make sure you land at the correct site. You shouldn’t be prompted to provide any financial account or credit card information if you’re in the right place.

    In a typical year, you’ll be able to see your report for free from each agency once a year, meaning once every 12 months, not once a calendar year. You can choose to check your reports from all agencies at once or space out your inquiries so that you can see a different report every few months. Some people prefer to see them all at once so they can do a thorough review of all reports at the same time. Others prefer to space out the reports, so they have a more frequent pulse on their credit. There’s no wrong or right approach - it's simply a matter of personal preference.

    Once you pull your report, you’ll want to review the report for accuracy. To help you through this process, view the Credit Report Review Checklist and information about reporting errors in this chapter.

    How to Access Your Credit Score

    When you’re reviewing your credit report, you’ll notice that your credit score isn’t included. Unlike your credit report, there are no regulations granting you free access to your credit score. In many cases, you must pay to see your score. However, some financial institutions provide members or customers with monthly or quarterly access to their credit scores by meeting certain criteria such as opening a checking account or taking out a loan.

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    Credit Report Review Checklist

    You can request your credit report for free once a year from three major credit reporting companies at www.AnnualCreditReport.com. Once you’ve downloaded your credit report, use this checklist as a guide to review each section.

    If you find errors or believe an account was opened fraudulently in your name, visit Link Annual Credit Report Dispute [www.annualcreditreport.com] for information on filing disputes with the credit reporting agency that issued the report and the business that provided the information.

    Logo PSECU

    How Can I Build or Repair Credit?

    The more you realize the importance of credit, the more concerned you may become with building and maintaining good credit. Here are some tips to help you get started whether you’re establishing credit for the first time or repairing your credit after getting off track.

    This page titled 6.1: Credit is shared under a CC BY license and was authored, remixed, and/or curated by Heather Burns, Connie Ogle, & Allyson Valentine.

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