How do I boost my credit score?

You asked...we got the answer!

My financial aid counselor told me that if I could raise my credit score I would get a better deal on my student loans. How do I boost my score?

Dating Your Lender

Your credit score is like your Facebook profile – lenders use them to determine who they want to get involved with. If you have a high number (over 700) it means that you’re good at paying back money so lenders will offer you a lower interest rate. For people who don’t pay their bills or are late paying them a lender will charge them a much higher rate because they are unpredictable borrowers. Loans that come directly from the federal government aren’t based on your credit score so those will carry the best rates – it’s the “private lenders” that will suck you dry. If you can, max out your federal loans first to buy yourself some time to make over your credit score before swimming with the private lender sharks. If you look closely you can see the dorsal fins sticking out of their suits….

A Buff Credit Score

So how do you look like a million bucks to your lender? It’s not complicated - pay your bills on time and pay off some credit card debt. These two actions will show them that you are now a responsible, predictable bill payer and that you will pay them back on time. It only takes 3-6 months to transform your credit score so the sooner you start the sooner you will be eligible for lower interest rates. Lower rates mean a lower payment which puts more money in your pocket when you get out of school. New wardrobe, anyone?

Know Where You Stand

Check your credit report and score through www.annualcreditreport.com. Watch out for other credit score websites – they’ll sell your information to the highest bidder. This one goes right to the credit agencies themselves: Experian, Equifax and TransUnion. Because credit scores are constantly changing check yours again 3 months before your next round of student loans. Cutting back on your expenses to pay down your credit cards for a few months will make a huge difference in your loan interest rate. That lower payment could make the difference between taking the first job that comes your way to make your huge payments and being able to wait for the right job. A lower interest rate and lower payment will give you that kind of flexibility.

Our Ask the Expert for your money questions is Rebecca Schreiber, a Certified Financial Planner with Solid Ground Financial Planning. What questions do you have about handling your hard-earned money? Ask away!

You asked...we got the answer!

My financial aid counselor told me that if I could raise my credit score I would get a better deal on my student loans. How do I boost my score?

Dating Your Lender

Your credit score is like your Facebook profile – lenders use them to determine who they want to get involved with. If you have a high number (over 700) it means that you’re good at paying back money so lenders will offer you a lower interest rate. For people who don’t pay their bills or are late paying them a lender will charge them a much higher rate because they are unpredictable borrowers. Loans that come directly from the federal government aren’t based on your credit score so those will carry the best rates – it’s the “private lenders” that will suck you dry. If you can, max out your federal loans first to buy yourself some time to make over your credit score before swimming with the private lender sharks. If you look closely you can see the dorsal fins sticking out of their suits….

A Buff Credit Score

So how do you look like a million bucks to your lender? It’s not complicated - pay your bills on time and pay off some credit card debt. These two actions will show them that you are now a responsible, predictable bill payer and that you will pay them back on time. It only takes 3-6 months to transform your credit score so the sooner you start the sooner you will be eligible for lower interest rates. Lower rates mean a lower payment which puts more money in your pocket when you get out of school. New wardrobe, anyone?

Know Where You Stand

Check your credit report and score through www.annualcreditreport.com. Watch out for other credit score websites – they’ll sell your information to the highest bidder. This one goes right to the credit agencies themselves: Experian, Equifax and TransUnion. Because credit scores are constantly changing check yours again 3 months before your next round of student loans. Cutting back on your expenses to pay down your credit cards for a few months will make a huge difference in your loan interest rate. That lower payment could make the difference between taking the first job that comes your way to make your huge payments and being able to wait for the right job. A lower interest rate and lower payment will give you that kind of flexibility.

Our Ask the Expert for your money questions is Rebecca Schreiber, a Certified Financial Planner with Solid Ground Financial Planning. What questions do you have about handling your hard-earned money? Ask away!