Credit
What it is and how to manage it.
What is Credit?
“An agreement between a borrower and a lender in which the borrower receives a set amount of money (or something else of value) and promises to repay the lender. Most lenders charge interest and other fees in order to make a profit from this agreement.”
Credit Score
A single numerical grade of your Credit worthiness. Think of it like your GPA, a single numerical grade of your academics.
A good credit score shows lenders that you are a trustworthy borrower and can lower your cost to borrow (the interest rate). This can help you when trying to buy a house, a car loan, or open other lines of credit.
Information of items that can affect your credit score
Credit Report
Credit Report is a detailed record of your financial history. On your credit report is a detailed list of each item that affects your credit score. You can check your credit Report for free once a year at each of the credit report agencies (Transunion, Equifax, Experian). We recommend checking your free credit report every year.
How to Get Started Using Credit
Make sure you have your budgeting skills down first before beginning to use credit! If you start using credit without being able to track your spending you may end up in debt and harm your credit score.
To get started with establishing credit:
- Apply for a college student credit card (NerdWallet List)
- Use the credit card strategically - Only make charges that you are able to pay
- Track your spending to make sure you can afford your payments
- Pay your balance off in full so interest and fees don’t accrue
- Automate your payments
- Make sure you can afford your payments
- Check you credit report from each of the 3 credit reporting agencies at AnnualCreditReport.com every year
Need Help Deciding if You Are Ready to Use Credit?
Email FinWell@baylor.edu to meet with a student money management coach who can help you decide if your ready to begin using credit