Credit and credit scores is one of those areas many people ignore or don’t think about until it is too late. Several of my peers will tell me about credit card debt they have accumulated in college, but what many of them don’t know is exactly how much that hurts you and any co-signer’s credit in the long run. For parents or guardians who co-sign on their student’s credit cards or loans, or students who currently have credit, it’s tremendously important to know the following facts.
If your student is delinquent, defaults or makes minimum payments – that impacts your credit score as well. So this means that if your student forgets to make a few loan payments, it will be reflected to an underwriter on how you make payments as well. Also if you apply for another loan – any debt you are included on as a co-signer will be taken into consideration by underwriters that determine if you qualify for a loan. This is due to the fact that debt-to-income ratio is a huge factor while applying for a loan; although the loan you’ve co-signed on may not directly be used for you, it’s nevertheless debt in your name.
For students like myself, it’s important to know that your credit score can make or break your likelihood to be approved for a car loan or sometimes a new lease at an apartment. When applying for loans, having good credit over bad credit can be extremely beneficial and save you TONS of money. Good credit could be the difference between a 2% interest loan and a 6% loan – depending on the loan amount and duration, it could save you thousands! My advice is to first get a calendar and always make sure utility bills, phone bills, rent and other responsibilities are paid on time and in full. It’s a great way to get started on being fiscally responsible. Remember that it’s totally free to receive your annual credit score from a credible website or loan officer; and you have the right under the Fair Credit Reporting Act (FCRA) to dispute any inaccuracies. For a free copy of your annual credit report, visit https://www.annualcreditreport.com/index.action.