Riverwoods, IL – You have probably heard the term “credit score” in conversations or advertisements, but what exactly is a credit score? And more importantly, as a college student, why is it important to know your credit score? A FICO Credit Score is a three-digit number that is calculated based on data from your credit report, such as the amount of money you owe to creditors, your payment history and length of credit history, and types of credit (i.e. revolving loans like a credit card and/or installment loans like a student loan). The higher your credit score, the more “credit worthy” you are in the eyes of lenders, and the more likely you are to qualify for better rates and terms for future loans. Your credit score can be a big factor during some of life’s big moments like renting your first apartment or purchasing a car. Because of this, it’s important to familiarize yourself with your credit score and, if you don’t yet have a credit score, to work toward establishing one.
You can now check your FICO Credit Score for free by using Discover’s new Credit Scorecard, even if you are not a Discover customer. Along with providing your FICO Score—the credit score that 90 percent of top lenders use—Credit Scorecard includes a summary of some of the data that determines your FICO Score.
In addition to monitoring your score, there are several actions you can do now that will serve you throughout your financial life. Here are three ways for people with limited or no credit history to get off on the right foot:
1. Check Your Credit Health
Just like you stay on top of your grades so there are no big surprises at the end of the term or semester, you should stay on top of your financial health. Your credit score is like a “grade” that’s used by lenders. The higher your score, the better off you’ll be when it comes time to lease a car or buy a home.
In fact, consumers who regularly check their credit score say doing so improves their credit behavior. A recent survey2 from Discover found that 73 percent of those who checked their credit score seven or more times in a year said that checking their score had a positive impact on their credit behavior, such as paying bills on time, paying down loans and maintaining low balances on their credit cards. You can check your FICO Score for free here, Credit Scorecard to see if your credit score “grade” is up to par.
2. The Benefits of a Student Credit Card
As a student, you may not be ready for an auto loan or mortgage, but you may want to consider getting a credit card. By using a credit card responsibility, you can start to lay the groundwork for a healthy credit score.
Before applying for a credit card, make sure to do your research. Many credit card companies offer a student version of their popular cards. The Discover it chrome for Students card offers the same great benefits as Discover’s non-student cards, such as flexible rewards and 100 percent U.S.-based customer service. Plus, you get your FICO Credit Score for free on monthly statements and online.
3. Pay Bills on Time
Your payment history typically makes up 35 percent of your FICO Credit Score. In general, people who continually pay their bills on time and demonstrate a good payment history tend to appear less risky to lenders. To stay on top of your payments, you can look into automatic payment options or mark a time on your calendar each month to pay your bill. Make it part of your routine!
This is also where having a budget comes in. If you have a job, you can plan to put a certain amount of income aside to make sure that you are paying off your bills each month. The school year is filled with fun things like going out to dinner with friends and concerts; just make sure you set a budget and that you can cover all of the costs.