If you have—or are planning to have—private student loans, your credit score and credit report are crucial pieces of information that can either save or cost you thousands of dollars over the life of your loan.
Much like your high school grade point average (GPA) is used by colleges to determine your likelihood to succeed at their institutions, your credit scores tell financial institutions how likely you are to be able to pay them back. If you have low credit scores, they may charge you more—in the form of a higher interest rate—because they are not sure you will actually pay back the full amount of the loan. If you have high credit scores, there is less risk to the lender and they may charge lower interest rates.
Your credit scores are determined by the details within your credit history, which is documented and compiled by consumer reporting agencies. This credit report contains addresses where you have lived, credit cards, loans and other lines of credit that you have (or had), how long you have had each credit source, and how you pay them down. Late payments, defaults, bankruptcies, and even judgements are all documented in your credit report. Because your credit scores affect how much you will pay for your loans, and if you will qualify for a loan, you will want to keep an eye on your credit report to make sure that the information it contains is accurate, and to see if there are items you could improve upon.
By law, you are entitled to one free credit report each year from any of the three major credit bureaus , so a great way to celebrate Get Smart About Credit Month would be to pull your credit report (if you haven’t already), and see what it tells you. You have to pay to see your calculated credit score—each credit bureau compiles your credit score with the data they have on file for you, so you may have a slightly different score at each bureau. If you don’t want to pay, you can try to calculate it yourself.