Building creditworthiness and fostering good financial practices is instrumental to your future financial wellbeing and strength. Choices that you make today can greatly impact your ability to attain future goals, such as purchasing a car or house. Establishing good credit facilitates one’s ability to obtain goods or services before actually paying for them. Your credit history demonstrates to potential lenders your ability, or inability, to manage your credit overtime. This, in turn, serves as an indication of the kind of risk you pose to a lender. If you have successfully manage your finances in the past and currently, you are deemed creditworthy because you are more likely to repay your debts.
Creditworthiness is captured in a 3-digit score assigned to an individual–the higher the score, the greater your creditworthiness.
Several factors are used in the calculation of one’s credit score:
Sources: AAMC & MyFico.com
The following data is detailed in your credit report:
- Identifiers (name, date of birth, social security number, etc.)
- What you owe (installment balances, revolving balances, etc.)
- Monthly payments and past due amounts
- Old balances paid off along with payment history
- Any recent inquiries along with any collection attempts
- Dates that accounts were opened and closed
- Additional information related to what has been borrowed
We recommend that students review their credit reports on annualcreditreport.com. This website will allow you to review your credit report from each of the three credit reporting agencies (TransUnion, Equifax, and Experian), free of charge, once per calendar year. It is best to check out your reports throughout the year, for example: one report every three months.
In an effort to build credit worthiness, one should adhere to the following practices:
- Pay bills on time
- Pay before the due date, preferably with automatic withdrawals
- Pay down outstanding balances
- Check your credit report periodically
- Protect your identity