Your credit report details your credit habits from the day you began purchasing items on credit to the present. To ensure a good credit history, do the following:

• Pay your bills on time. If you don't have a long credit history, this is the most important thing you can do to get a high credit score.
• Don't have too many open lines of credit, particularly revolving credit such as credit cards.
• Pay credit card balances completely each month.
• If you must keep balances on your credit cards, don't max out one card while maintaining smaller balances on others. Try to keep a small balance on each card.
• Avoid bankruptcy and tax problems.
• Regularly monitor your credit report for identity theft or reporting errors. Federal law allows you to get one free copy of your credit report per year. Visit AnnualCreditReport.com for details.

Lower credit ratings may indicate that you are a credit risk. Lower ratings decrease your chances of obtaining loans for a car or house.

The good news is that if you have no student loans and are considering only Stafford Loans or Perkins Loans, credit history is not a factor. These programs are based on your financial need. Private student loan programs; however, do look at credit history and worthiness. Loans designed for parents, whether federal or private, also have a credit component.

Review Your History

The National Foundation for Consumer Credit (NFCC) recommends that you check your credit information yearly. Obtain a copy of your credit report from each of the three major credit bureaus:

• Equifax: (1-800-685-1111)
• Experian: (1-888-397-3742)
• TransUnion: (1-800-916-8800)

Request the reports by mail, phone, or Internet. The cost is minimal or may even be free in some states. You can also request a free credit report at AnnualCreditReport.com.

Reasons for Bad Credit

Things that could get in the way of a good credit rating:

• Filing for bankruptcy
• Exceeding the credit limit on your credit card
• Defaulting on a loan
• Writing bad checks.
• Persistently late payments.
• Too many credit cards with large balances

Credit Rating Repair

Does your report show incorrect information? You can repair your history if there are errors. Contact the credit bureau and creditor in writing.

Can you resolve the dispute?

If not, the creditor must report the disputed status to the credit bureau.

Did you resolve the dispute?

If so, the creditor will send updated information to the credit bureaus. You can also ask the credit bureau to send a new report to anyone who has requested your credit information in the previous six months?or to any employer who requested a credit report during the previous two years.

Does your credit report show negative information? Take action immediately.

• Pay balances so creditors can update your file.
• Write a brief explanation to be included in future reports (e.g., describe instances of unemployment, catastrophic family illness, etc.).

What if you can't resolve a disputed item? You have the right to attach a 100-word statement, free of charge, explaining the nature of your disagreement. This statement will become part of your credit file, and will be included each time your credit file is accessed.

Credit Scoring

Your credit score (or FICO®, named after Fair Isaac, the company that developed the most widely used credit score) determines the interest rate you receive when you take out a private student loan. Your credit practices are scored throughout your life and may also be used to determine your interest rate and fees if you borrow to purchase a house, car, or other large-ticket item.

Your credit score is a statistical picture of your credit handling history. Lenders use it to predict your future credit performance. It reflects the following information:

• Amount of your outstanding debt.
• Past due payments.
• Number of open accounts.
• Number of inquiries into your credit history.

Each lender decides on an acceptable scoring range and may require additional information from higher risk applicants. If you are considered a high risk, you may still qualify for a loan, but might have to pay a higher interest rate or higher fees to offset the risk.

If you have significant risk factors, you may need a co-signer?someone who will pay your loan if you do not.

Tips to Improve your Credit Score

• Always pay bills on time.
• Keep credit card balances low.
• Be sure you correct every inaccuracy with all three national credit bureaus.
• Close accounts you are not using.
• Minimize the number of times you give creditors permission to "inquire" about your credit record.

Pre-Approval

Some lenders allow you to check your credit eligibility before submitting your loan application, pre-approving your credit. Knowing your credit results early, gives you an opportunity to plan. There are often time limits on the credit pre-approval.

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