How to Monitor Your Credit Score

“F-R-E-E that spells free, baby.”

There is no doubt that the majority of people recognize this jingle from the popular television commercials advertising, a Web site that allows users to check their credit scores free of charge. While many recognize this advertisement, there is a significantly lower number of people who could describe what a credit score actually consists of.

“I don’t think many college students are really familiar with credit scores or how to check them,” said Daphne Phillips, a sophomore at Washburn University.  

Phillips also said that in these students’ defense, students are just starting to think about establishing credit when they reach college age, so they may not be familiar with the idea of credit yet.

According to the Federal Trade Commission, a government organization that deals with issues affecting the economic life of Americans, credit is much more than a plastic card; it is a record of a person’s financial trustworthiness. Having good credit gives people easier access to loans and lower interest rates. Low interest rates typically mean lower monthly payments, which makes the idea of making major purchases, such as a car or house, a little less of a financial burden.

Establishing credit can be difficult starting out because having no credit history makes it difficult for lenders to know if you are a risk to repay loans or make timely payments. The FTC encourages people starting out to apply for credit cards through stores, as they are more likely to issue a credit card to people without established history. It may also be a good idea to ask someone with an established credit history to co-sign on a loan or credit card, ensuring that they will take on the payment responsibility if necessary.

Some parents will work to establish credit for their children by taking out a loan or credit card with the student’s name on it, but make payments themselves to ensure the payments are timely and large enough to gain responsible credit history.

“My parents gave me two credit cards to start working on establishing credit,” Phillips said. “I have them, but they pay the bill.”

While it is important to maintain good credit, many people find themselves charging too much or paying less toward debt than what is advised. This can cause a credit score to tank and cause serious complications in the future. Budgeting, credit counseling and filing bankruptcy are all options that can help in a credit crunch.

A brochure created by the FTC breaks down all the elements that are taken into consideration when credit scores are calculated. For example, creditors may give points for bill-paying history, the number and type of accounts opened, history of late payments, outstanding debt and any former collections actions. The three major credit scoring agencies include Equifax, Experian and TransUnion. These agencies don’t share these files unless specifically requested, and credit reports are free to the public in most states.

It is important to check credit scores regularly to ensure that no fraudulent activity is occurring. The FTC advises the public to be careful with credit cards and keep an eye on payment deadlines. But most importantly, it is vital to be aware of the credit history being established.

Lauren Van Patten, a Washburn sophomore, thinks it is important for students to pay attention to their credit scores now.

“What you do now can affect you for the rest of your life. A lot of students who don’t pay attention might be prevented from buying a car or house later because they didn’t think meeting deadlines was important at the time,” Van Patten said.