Is Financial Success Really a Non-Credit Course?
“Is this a for-credit course?” “How many credits do I need to graduate?” “Do we get credit for this assignment?” These are all questions that plague college students across the country as they navigate the sometimes confusing world of college academics and policies. While these credits are important, there is another type of credit that students should focus on, as well – financial credit.
Credit in the world of finances is your ability to borrow money or receive goods based on the belief that you will repay the debt in the future. While that definition is a mouthful, it is crucial that you know and understand how credit works in order to be successful in the future.
Your credibility is typically judged by the information on your credit report and your credit score. Your credit report is a record of your financial history. It is somewhat comparable in structure to an academic transcript. It contains identifying information about you – such as your name, address, date of birth, social security number – just as an academic transcript would. However, in place of courses you have taken and the grades you have earned, it lists the companies with which you have accounts open and whether or not these accounts are in good standing.
Your credit score is a three-digit number that rates your likelihood to repay a debt. It is calculated using the information in your credit report. The same way a college entrance exam allows colleges to quickly compare you to other students, your credit score allows potential lenders to compare you to other borrowers.
When you open a financial account such as a credit card or a loan, that company begins to report regularly to the credit reporting agencies who compile information into your credit report. They will let the credit reporting agencies know how you are doing with your account, such as being in good standing (payments are up to date), delinquent (payment is late by a set number of days), or if the debt has gone to collections. This information is then added to your credit report and ultimately factored into your credit score.
A lot of students believe that they do not have credit or a credit report because they do not have a credit card, auto loan, or home loan in their name. However, the truth is that many students do have a credit history simply due to the existence of their student loans.
Building and maintaining good credit is important for you as a student because you may one day need a credit card, auto loan, or mortgage. Potential landlords and employers are also permitted to require credit checks as part of the rental or employment application process. So, if you’re hoping to one day move out on your own and get the job of your dreams, learning how to build and maintain good credit now is an important step toward your goals.
Sara Weiser is an employee of PSECU and is not a financial or legal expert. The information provided is for informational purposes only. Please seek the advice of a qualified financial, tax, legal or other professional to determine what options may be best for you.