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Are Student Loans Impacting Your Credit Score?

Even if you only have a basic knowledge of how credit scores are calculated, you may be aware of the fact that taking on debt and then paying it off in a timely and consistent manner is generally considered one of the best ways to build good credit, while late and missed payments can show up as black marks on your credit history.  What you might not know is that different types of debt can have different ramifications where your credit is concerned.

 

For example, the balances carried on credit cards are considered to be a form of revolving credit, according to Investopedia.  Lines of credit also fall into this category.  This type of debt includes a maximum limit and accounts are considered “open-ended”, which is to say, you still have access to agreed-upon funds even after you’ve borrowed and paid back up to the maximum.

 

Then there are installment credit accounts, including loans for houses, cars, and college tuition, just for example, which Investopedia characterizes as separate from revolving credit in that there are terms attached which specify the duration for payments, the number and amount of payments, and an end date for the loan.  Further, once payments are made, the money cannot be borrowed again.

 

These types of debt affect your credit score in different ways.  Revolving debt is potentially more damaging, as carrying high balances on credit cards could have an enormous impact on your credit score.  Revolving credit determines 30% of your score, according to MyFICO, although there are certainly other factors involved, including:

  • What is owed on all accounts
  • What is owed on different types of accounts
  • The number of accounts with balances
  • The percentage of revolving credit in use (credit utilization ratio)
  • The amount still owed on installment loans

 

Of course, if you find that revolving credit is severely impacting your credit score, Investopedia suggests that paying it down also has the potential to deliver significant improvements, and some people even utilize installment credit (personal loans) to pay off revolving credit as a means of lowering interest rates and shifting to a less impactful form of debt.

Although revolving credit accounts for a major portion of your credit score, installment loans can also have an impact in both positive and negative ways, according to an article from Student Loan Hero.  Here’s what you need to know about how student loans can impact your credit score.

 

How Can Student Loans Help Credit?

Because installment loans aren’t weighted as heavily as revolving credit when determining credit score, they may have less potential to damage your rating.  In fact, FICO statistics show that approximately 38% of consumers with student loan debt totaling over $50,000 fall enjoy a FICO score of over 700, which is considered the average score for American consumers, according to a recent article by Fox Business.  Those in the 740-799 range are considered to have very good credit, while a score of 800 or higher is considered exceptional.  By comparison, about 28% of consumers with student loan debt over $50,000 have scores under 599, which is considered a poor credit rating.

 

What does this mean?  It’s difficult to say, because credit ratings are based on so many different factors aside from student loan debt.  However, when managed appropriately, student loans, like any type of installment loans, could certainly improve a credit rating.

 

While revolving credit accounts for 30% of a credit rating, payment history is actually more important, delivering a whopping 35% of your credit score.  If you pay your monthly student loan bills on time and in full, you should be able to steadily build good credit over time, especially when you take the same care with all your other financial obligations.  Of course, this can be a double-edged sword, as well.

 

How Can Student Loans Hurt Credit?

While student loans don’t necessarily have the same major detractors as revolving credit, they still have the potential to harm your score if you don’t manage them appropriately, and even a single slip could cost you.

 

Even if you’re a responsible adult and you’re diligently paying down debt, it can be hard to juggle the many student loan payments associated with years of schooling (and taking out new federal student loans each year).  Something could slip through the cracks.  When this happens, it could have a negative impact on your credit score.

 

Even worse, the better your credit score, the more a late or missed payment could impact you, according to MyFICO.  This is because a higher score reflects less risk.  While a consumer with a lower FICO score is known to have some credit issues and is therefore somewhat less impacted by future problems like late or missed payments, someone with a stellar credit rating may fall further for similar infractions because the risk was not anticipated.  It doesn’t seem fair, but when paying down student loan debt, it’s important to understand the potential impact.

 

Why Does the Impact of Student Loans Matter?

Your credit score is used to determine whether you are approved for future loans and to calculate the interest rate and terms you are eligible for, according to Student Loan Hero.  While a single late or missed payment isn’t going to tank your score, and you can always speak with lenders about removing black marks on your credit report once you’ve rectified a mistake, you naturally want to maintain a high score if at all possible so as to improve your odds for loan approval and the best terms down the road.

 

How Can I Improve My Credit Score While Paying Off Student Loans?

Even if you’ve had smooth sailing so far, you may be interested in the benefits to be gained when you refinance student loans.*  If you currently juggle several student loans and you’re worried about the possibility of missing a payment somewhere along the line, you could refinance and consolidate student loans into one convenient payment.

 

In some cases, you might even save money when you refinance student loans by lowering interest rates or transferring variable interest loans to fixed interest options.  It depends on your situation, but it’s something to consider when it comes to controlling how student loans impact your credit score.

 

ELFI Credit Series: 5 Habits for Good Credit Hygiene

 


 

 

*Subject to credit approval. Terms and conditions apply.

 

Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

The Importance of a Good Debt to Income (DTI) Ratio

It is evident to most people that having more income and less debt is good for their finances. If you have too much debt compared to income, any shock to your income level could mean you end up with unsustainable levels of debt. Every month you have money coming in (your salary plus additional income) and money going out (your expenses). Your expenses include your recurring bills for electricity, your cell phone, the internet, etc. There are also regular amounts that you spend on necessities, such as groceries or transportation. On top of all of this, there’s the money you spend to service any debts that you may have. These debts could include your mortgage, rent, car loan, and any student loans, personal loans, or credit card debt.

 

What is the Debt-to-Income Ratio (DTI)?

The Debt-to-Income Ratio (DTI) lets you see how your total monthly debt relates to your gross monthly income. Your gross monthly income is your total income from all sources before taxes and other deductions are taken out. Below is the formula for calculating your DTI:

DTI = (Total of your monthly debt payments/your gross monthly income) x 100

 

Example: Let’s suppose the following. Your gross monthly income is $5,000, and you pay $1,500 a month to cover your mortgage, plus $350 a month for your student loans, and you have no other debt. Your total monthly payments to cover your debts amounts to $1,850.

 

Your DTI is (1,850/5,000) x 100 = 37%

Here’s a handy calculator to work out your DTI.

 

Why is Your DTI Important?

Your DTI is an important number to keep an eye on because it tells you whether your financial situation is good or if it is precarious. If your DTI is high, 60% for example, any blow to your income will leave you struggling to pay down your debt. If you are hit with some unexpected expenses (e.g., medical bills or your car needs expensive repairs), it will be harder for you to keep on top of your debt payments than if your DTI was only 25%.

 

DTI and Your Credit Risk

DTI is typically used within the lending industry. If you apply for a loan, a lender will look at your DTI as an important measure of risk. If you have a high DTI, you will be regarded as more likely to default on a loan. If you apply for a mortgage, your DTI will be calculated as part of the underwriting process. Usually, 43% is the highest DTI you can have and likely receive a Qualified Mortgage. (A Qualified Mortgage is a preferred type of mortgage because it comes with more protections for the borrower, e.g., limits on fees.)

 

So, What is a Good DTI?

If 43% is the top level DTI necessary to obtain a Qualified Mortgage, what is a “good” DTI? According to NerdWallet, a DTI of 20% or below is low. A DTI of 40% or more is an indication of financial stress. So, a good rule of thumb is that a good DTI should be between these two figures, and the lower, the better. 

 

The DTI Bottom Line

Your DTI is an essential measure of your financial security. The higher the number, the less likely it is that you’ll be unable to pay down your debt. If there are months when it seems that all your money is going toward debt payments, then your DTI is probably too high. With a low DTI, you will be able to weather any financial storms and maybe even take some risks. For example, if you want to take a job in a field you’ve always dreamed about but are hesitating because it pays less, it will be easier to adjust to a lower income. Plus, debt equals stress. The higher your DTI, the more you can begin to feel that you’re working just to pay off your creditors, and no one wants that.

 

DTI and Student Loan Refinancing

Your DTI is one of several factors that lenders look at if you apply to refinance your student loans. They may also assess your credit history, employment record, and savings. Refinancing your student loans may actually decrease your DTI by lowering your monthly student loan payment. This may help you, for example, if you want to apply for a mortgage. ELFI can help you figure out what your DTI is and if you are a good candidate for student loan refinancing. Give us a call today at 1.844.601.ELFI.

 

Learn More About Student Loan Refinancing

 

Terms and conditions apply. Subject to credit approval.

 

NOTICE: Third Party Web Sites

Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – The bank is not responsible for the content. Please contact us with any concerns or comments.

Will Applying for a Student Loan Hurt My Credit Score?

So you’re looking for student loans to finance your education – good for you! Student loans can be an option to bridge the gap when financial aid doesn’t cover the full cost of your tuition and college expenses, which is the case for about 43 million Americans. Nonetheless, it’s smart to think about how student loans can affect your financial future and whether applying for a student loan will hurt your credit score.

 

First off, let’s explain what a credit score is. Simply put, it’s a three-digit number that indicates your relative credit risk. One of the most common credit-scoring model is a FICO® score. Ranging from 300 to 850, the higher the number, the more likely (theoretically) someone is to pay their bills on time. Factors that determine your credit score include:

  • Payment history
  • Your debt-to-income ratio (DTI)
  • How established your credit is
  • Credit mix
  • Recent applications for credit

 

Needless to say, a major indicator of your financial well-being is indicated in your credit score.

 

How Applying for Private Student Loans Affects Your Credit Score

 

Whenever you apply to take out a loan, a credit inquiry from one or several credit reporting agencies will likely occur. If you have a solid credit history, the effects are usually minimal. However, the effects will typically be larger for someone with little-to-no credit. According to an article by Bev O’Shea posted on Nerdwallet, whatever impact your credit score suffers should fall off after 12 months, and after about 24 months, the inquiry should disappear from your credit report entirely.

 

There’s also an important distinction between a “soft” and “hard” credit inquiry.

 

A “soft pull,” as it’s known, can be done just in connection with pre-qualification for a loan, whether it’s a credit card offer you receive in the mail, mortgage, student loan, or car loan. Some employers will do a soft pull of your credit as well. Soft pulls do not impact your credit score.

 

A “hard pull” generally requires your consent and happens when you apply for the credit you’re seeking. It’s the hard pulls that show up on your credit report. It’s important to monitor your credit report and dispute any hard inquiries you didn’t authorize.

 

In the case of private student loans, a prequalification will not typically affect your credit, whereas applying for a loan will show up on your report.

 

Applying for Multiple Private Student Loans

 

So, what if you submit multiple applications? Will they all affect your credit score? It’s hard to know for sure, as credit-scoring model companies don’t provide a lot of detail about their models. Generally speaking, credit-scoring models appear to take into consideration that if an applicant has multiple inquiries for a student loan they may be shopping for the best rate. One key point is that the closer those inquires are together, the less impact it may have on your credit score.

 

In other words, shopping around to find the best loan option for you should not affect your credit score dramatically and is likely not a major cause for concern. By applying for multiple private student loans, you can see which lender will actually give you the best rate – important when it comes to saving money over the life of your loan.

 

ELFI offers a variety of private student loan options for financing your undergraduate or graduate education, as well as private student loan options for parents.* Check out our full list of frequently asked questions or contact ELFI at 1-844-601-3534 to speak with a Personal Loan Advisor.

 

*Subject to credit approval. Terms and conditions apply.

 

Note: Links to other websites are provided as a convenience only. A link does not imply SouthEast Bank’s sponsorship or approval of any other site. SouthEast Bank does not control the content of these sites.

How Does Student Loan Refinancing Work?

By Caroline Farhat

 

When you agree to take out a student loan, you also sign on to a specific set of terms and conditions that cover things such as your payment schedule and the interest you’ll pay on your loan. These terms represent the obligations of the borrower and cosigner until the loan is completely paid off. Interest rates for federal student loans are determined by the government, whereas private lenders will set their terms according to your credit score (or that of a cosigner).

Can I Change my Loan Terms?

Before graduating, you probably didn’t give much thought to student loan repayment terms. That being said, student loan terms that fit your needs and goals before starting school aren’t always ideal for you following graduation. For this reason, it is possible to change your loan terms after you graduate, and if you’re approved for a new loan, the new loan servicer pays the old loan servicer for the cost of the loan. The student loan debt is then transferred to the new loan servicer. With the new loan typically comes new and better student loan terms.

 

Why Should I Refinance my Student Loan?

Simply put, student loan refinancing works when you can take out a new loan in order to pay off the first loan with better terms. Here are four reasons why you might want to refinance your student loan:

Your Credit Score Has Improved Since College

Student loans provided by the federal government don’t take credit scores into account – every borrower is given the same interest rate regardless of credit history. If you have taken out a private loan, your interest rate could have been impacted by your or your cosigner’s credit score. After a few years in the workforce, your credit score usually improves. An ideal time to refinance your student loans is when your credit score exceeds 650. This should enable you to refinance your loan at a lower interest rate. Most student loan refinance companies will require a minimum credit score for refinancing approval, so be sure to seek that information out before applying.

A Longer Credit History Could Improve Your Interest Rate

Interest rates for private student loans are usually affected by your or your cosigner’s demonstrated credit history, and most student loan refinance companies will provide a minimum credit score to apply for refinancing. A refinancing company will also usually provide favorable terms to a borrower who has illustrated a financially responsible credit history – for example, by paying bills on time. An individual who has multiple defaults on their credit history is likely to receive less favorable terms or be turned down for refinancing.

Overall Interest Rates May Be Lower

Interest rates for student loans are tied to certain economic indicators at the time you applied for the loan. So, you may have a student loan with an above-average interest rate because you went to college when interest rates were high. When interest rates decrease because of changing economic conditions, you will almost certainly be able to refinance and get a better deal on your new loan.

Consolidation

Refinancing gives you the option of consolidating several loans with different interest rates into a single loan with a more favorable interest rate. One loan with one interest rate is much easier to manage.

 

Fixed and Variable Interest Rates

When you apply to refinance your student loan, you can choose between a fixed or a variable interest rate. A fixed rate doesn’t change unless you are refinancing again. A variable rate will fluctuate over time based on certain economic indicators. Variable rates coincide with low-interest rates across the economy, and they can sometimes fall to below 3%. If you find yourself with a high income and interest rates are declining, then it may be possible to get a great refinancing deal. This works by choosing a variable interest rate and paying off your loan entirely before interest rates start rising again, or by taking advantage of a low fixed interest rate and sticking with it.

 

Avoiding the Risks of Refinancing Student Loans

Refinancing your student loan can be a great choice, but there are some risks you want to watch out for:

  • High-interest rates. If interest rates are high, you might end up paying more over time than if you had stayed with your original loan.
  • Too many fees. Make sure that refinancing fees don’t outweigh the savings from your lower interest rate. Look for student loan refinancing that comes with no fees.
  • Unrealistic repayment schedules. Federal student loans provide you with access to repayment plans based on a low yearly income. Make sure that you can meet the monthly payments on your refinanced loan.

 

When Should I Refinance my Student Loan?

The primary reason to refinance your student loan is to shift into a much more favorable loan. That loan could have a lower interest rate and save you money. Additionally, if you qualify, you’ll have the flexibility to adjust the repayment terms. This means that you could pay the loan off with a shorter term or extend the term so it costs you less every month or is easier to manage.

Use ELFI to Refinance Your Student Loans

You may be pleasantly surprised at how easy it can be to repay your loan faster and more effectively. Doing so can help you avoid the stress of too much student loan debt and enjoy a more prosperous financial life. It can be hard to tell when the best time to refinance your student loan is, so click here for a handy student loan refinancing calculator to determine how much you might save. For a no-obligation consultation, call ELFI at 1.844.601.ELFI.

 

Learn More About Student Loan Refinancing

 

Terms and conditions apply. Subject to credit approval.

 

NOTICE: Third Party Web Sites
Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – The bank is not responsible for the content. Please contact us with any concerns or comments.

How to Build Your Child’s Credit Score When They Don’t Have One Yet

From the 2007 Housing Crisis, 2008 Stock Market Crash, and now the student debt crisis there is no surprise parents nationwide are looking to educate and protect their children on finances. Many people during these national events lacked basic financial know-how and self-discipline. Gen-Xers and millennials, starting to have children of their own, worry that a new generation could be seduced by the allure of instant gratification and the digital disconnect between earning and spending money. What as a parent can you do for a young child to teach them finances and help them learn the basics? Here are some basic tips to help your children build healthy credit and learn to use it responsibly.

 

Start With Basic Financial Life Lessons

Whether your child is 2 or 22, financial education is the key to building good credit and financial independence. Erin Lowry, business blogger and author of Broke Millennial: Stop Scraping By and Get Your Financial Life Together, explained in a recent podcast that her parents taught her about delayed gratification early in life. “I was really encouraged from a very young age to start making money, especially if I wanted something,” Lowry said.

 

Saving for discretionary purchases is a lesson many young children can miss. A growing number of young adults also don’t have realistic expectations of their future earning power. Lowry grew up in a different reality. She explains that her first successful enterprise was at age 7, selling doughnuts at a family garage sale. Before she could feel too excited about her earnings, her father adjusted the amount she made by taking out the cost of the doughnuts and wages for her sister. He explained that the money left was her profit. “He actually took the money,” she remembers. “That is something that has stuck with me forever.”

 

It’s never too late to teach lessons like these. Resources for financial education are abundant in print and online, and parents can refer adult children to Lowry’s book and her blog, brokemillennial.com. For younger children, check out this post by Dave Baldwin, “The Five Best Apps for Teaching Kids How to Manage Their Money.”

 

Three Tips for Establishing Good Credit for Your Children

Parents with good credit and a clear vision of their children’s financial future can take these three actions to ensure a sound credit score for children reaching adulthood.

 

TIP 1: Make your child an authorized credit card user.

There is no minimum age to most credit cards, so you can add your child as an authorized user as early as you like. The best part is you do not have to give the child access to the card, just keep it in a safe place. It’s imperative that you use the credit card wisely and are able to pay the minimum monthly balance on the card. If you are unable to make payments on the card that could negatively affect your child’s credit history too. Try to only use the card for reoccurring balances like gas or food shopping.

 

When your child comes of age to have their first credit card in adulthood, they will benefit from your history of timely payments and reasonable use of credit. It will also benefit them if they need a loan to attend college and you as a parent may not need to be a cosigner.

 

TIP 2: Add a FREE credit freeze to your child’s credit report until they reach age 18.

Contact each of the three reporting agencies, Equifax, Experian, and TransUnion, to request a freeze in your child’s name. In some states, the freeze may need to be renewed every seven years. A credit freeze is fairly simple to implement and will protect your child from identity theft, which in turn will protect their credit history and credit score. You can also lift credit freezes when your child is ready to apply for credit.

 

It may seem like an extreme to put a credit freeze on your two months old credit but it will only protect them in the long run. Identity theft to children is an unfortunate reality in the United States. According to CNBC, more than 1 million minors were victims of identity theft or fraud in 2017. What may be even more surprising is that data breaches are just as much a problem for minors as for adults, if not more. According to CNBC, only 19% of adults were fraud victims compared to a staggering 39% of minors due to data breaches. This can happen to your child, but it can be prevented. You have the power to protect your children from falling victim to fraud. Not to mention a credit freeze is free thanks to recent laws passed by the federal government, so it won’t even cost you or your family a dime.

 

To learn more about protecting your child’s credit and preventing identity theft, visit the Federal Trade Commission’s Consumer Information site.

 

TIP 3: Set up a secure credit card account for your child to use.

A secure credit card is similar to an unsecured or the “normal” type of credit card. The only major difference is that a deposit is used to open a secured credit card account. The amount of secured credit card deposit is usually the credit limit of that secured credit card. Now, as long as all payments are made on time and in full at the end of the designated period you’ll receive your deposit back. Additionally, that fact that all payments were made on time and in full means that you should see that reflected in your credit report and you may even see that reflected in your credit score. If your child fails to make on-time payments or fails to pay the full amount of the card this could hurt your child’s credit instead of helping it.

 

If you choose to give your teenager a secured credit card you should be certain that you discuss the responsibilities of card with them. Make sure your child is committed to paying on time, staying within the credit limit, and using the card for only appropriate expenses you have discussed in advance. This is a great responsibility to provide a teenager because it really gives them the ability to start developing good financial habits. Whether that is putting an alert in their cell phone when the payment is due or if that is handwriting it on a calendar. Additionally, your child will have the opportunity to really learn to budget and live within their means. These are fundamental finance lessons and habits that will help to lay the groundwork of what could be a very financially responsible young person.

 

Financial Outlook

 

Regardless of what ways you choose to teach your child about credit or build their credit, know that your outlook on finances can easily become your child’s. If you find yourself scared of money, it’s likely your child will too. So often children learn relationships based on what they see their parents doing, so be sure that you’re laying the right framework for them to be successful. It doesn’t have to be an overly complex and if you aren’t sure that what you are teaching them is correct try looking locally for classes or programs. You should be able to find some financial literacy courses either online or within your local community. These can really help your child to familiarize themselves with common financial terms and create good financial habits. Good financial habits include how to save money, charitable giving, and even what taxes are.  No one knows your child better than you and no one wants them to succeed more than you, so be sure to give them the right tools and resources to do so.

 

Ask These 10 Questions When Hiring a Financial Advisor

 

 

NOTICE: Third Party Web Sites
Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – The bank is not responsible for the content. Please contact us with any concerns or comments.

What’s a Credit Freeze?

What does buying a house, applying for a student loan, and getting a personal loan all have in common? They are all different forms of credit. Credit is provided to you by a financial lender.  That lender will utilize your credit report in order to evaluate your credit history to decide if you qualify for credit with them. While evaluating your credit history and credit score they will do an inquiry on your credit. This inquiry can affect your credit score and can be placed on a report depending on the type of inquiry that’s completed by the institution. It’s essential to know the two different types of credit inquiries, what a credit freeze is, how it relates to a credit inquiry, the benefits of a credit freeze, and how to put one in place and remove it.

 

What Is a Credit Inquiry?

 

According to myFICO.com, a credit inquiry is a “request by a ‘legitimate business’ to check your credit.” These checks are categorized as either “hard” or “soft” inquiries, which we’ll break down in more detail later. “Credit pulls” are often a casual term used to describe both types of inquiries which gives a person, lender, or company the ability to view your credit report and see your credit score. Both types of credit pulls are included on your credit report but, only you can see the soft inquiries.

 

For example, imagine you’re looking for a mortgage. Let’s say that a credit card company recently did multiple soft credit inquiries on your account to “pre-qualify” you for a new credit card promotion that they have. When the mortgage company you submitted an application too reviews your credit report, they will not see the soft credit inquiries completed by the credit card company.  Additionally, the soft inquiries that were completed by the credit card company will not affect your credit score.

 

Regardless, the type of credit you’re opening, obtaining credit takes time, careful consideration, and patience. Each time a lender accesses your credit score and credit report to make a decision, you run the risk of damaging your creditworthiness. So what types of credit inquiries will affect your credit report and credit score? What type of credit inquiry are they, soft credit pulls or hard credit pulls?

 

 

Student Loan Refinancing: How to Avoid Predatory Lending

 

 

 

Soft Credit Inquiries vs. Hard Credit Inquiries

 

There are many differences between soft credit inquiries and hard credit inquiries. For example, soft credit inquiries can be part of the employment process if you are applying to a financial institution. Soft credit inquiries won’t affect your credit score, and they won’t show up on a credit report. Soft credit inquiries can be done without your permission. You may be wondering, “who’s sitting around running my credit report on a Saturday night?” Involuntary checks on your credit report will typically come from financial lenders who want to market a “pre-qualified” offer to you. We’ve all seen these types of mailers that you get from unfamiliar companies that say “Hey, you’ve pre-qualified for an auto loan! Here’s your special code go sign up today!” Soft credit inquiries usually consist of employment verification checks, pre-qualified credit card offers, when you check your credit score, and pre-qualified insurance quotes. Now, we know what a soft credit inquiry or soft credit pull is, but what is a hard credit inquiry or hard credit pull?

 

 

Hard credit inquiries are usually completed for larger banking requests like submitting an application for a mortgage. For example, you’d submit an application if you were applying for a mortgage, personal loan, auto loan, or student loan, among other types of loans. After having a hard credit inquiry completed there is a chance that your credit score may be affected. Multiple hard credit inquiries can affect your credit score negatively and all the hard credit inquiries will be visible on your credit report. These inquiries can show up on your credit report for up to two years after the inquiry is completed.

 

Typically when you’re submitting an application or applying for new credit – it will affect your FICO score if you are applying for a loan with multiple lenders. You should still apply to multiple lenders to find yourself the best interest rates. Now, if you are applying for the same type of credit, it is likely that if the inquiries are done within a certain window, they may be counted as a single inquiry. Inquiries are important to understand because they are the building block to your credit score and credit report which illustrates for lenders your financial wellness. Be sure that you know what you are signing up for before you proceed to submit those application documents. Speaking of financial wellness, what is a credit freeze and how can you benefit from it?

 

What is a Credit Freeze?

A credit freeze is pretty self-explanatory, it’s a freeze or hold that is placed on your credit to stop lenders from completing any inquiries. You may have heard a credit freeze referred to as a security freeze. Having a credit freeze will not impact your day-to-day financial wellness routines. You’ll still have the ability to pull an annual credit report to review it for accuracy. If you want to open up new credit that will require a hard credit inquiry all you need to do is simply lift the credit freeze temporally until it is completed. It’s important to note that though you may have a credit freeze in place, creditors, debt collectors, who actively have an account that belongs to you and government agencies utilizing warrants, and subpoenas will have access to your credit report.  All these simple things to secure your financial wellness and guess what? It gets better, all credit freezes are free!

 

You’re protecting your identity from thieves who may be trying to open accounts in your name, but it doesn’t cost a dime – no brainer! As we learned above, when you’re applying for credit like a mortgage, a lender will need to do a hard credit inquiry. If you’re not expecting to have your credit reviewed, it’s recommended that you place a credit freeze on your account. It’s important to know how to put a credit freeze into action and get it onto your account ASAP to keep those thieves away! Also, if you are a parent of a child under the age of sixteen, you should consider freezing their account too as per the FTC.

 

How to Implement a Credit Freeze

Now it sounds like it’s a lot harder than it actually is to implement a credit freeze. It also sounds way expensive too, but we know thanks to government laws it is free! Here’s how to place a credit freeze with each of the major U.S. credit agencies.

 

Equifax:

Visit https://www.equifax.com/personal/credit-report-services/ to setup an Equifax account.

 

Step 1 –

Provide Personal Information (Name, Date of Birth, Social Security Number, Mobile Number, Address)

 

Step 2-

Create Account Details (Email Address, Password)

 

Step 3-

Verify your identity using a text message or answering financial questions about yourself. My phone was broken, so I got to take my very own financial quiz to confirm my identity.

 

Step 4-

Once the quiz questions are answered you’re queued to sign in.

 

Step 5-

Select “Place or Manage A Freeze”

 

Transunion:

Visit https://www.transunion.com/credit-freeze to setup a Transunion Account.

 

Step 1- Select “Add Freeze”

 

Step 2- Provide Personal Information (Name, Date of Birth, Last 4 Digits of Social Security Number, Address)

 

Step 3- Create an Account

 

Step 4- Verify finance history via questions provided.

 

Step 5- Add Credit Freeze.

 

Experian:

Visithttps://www.experian.com/freeze/center.html and select “Add a Security Freeze”

 

Select Whose Credit You’d like to Freeze

 

Step 1- Provide Personal Information (Name, Date of Birth, Social Security Number, Address, Email Address, Create a Pin)

 

If you are serious about freezing your credit you’re going to want to utilize all three U.S. major credit agencies Equifax, Transunion, and Experian. Most of them provide a pin once the freeze is placed, so be sure that you keep that pin for your records. When you are ready to lift the security freeze or credit freeze you should have it readily available to you.

 

How To Lift a Credit Freeze

 

You can lift a credit freeze or you can choose to remove it altogether. In order to do so, it’s similar to the credit freeze sign up process. You need to contact each credit agency and make a request to remove the credit freeze. As we discussed previously many of the three major agencies utilize a pin, almost like a password, that you’ll need to provide to lift or remove the credit freeze from that bureau.

 

Attaining good credit and working hard to keep your finances healthy, isn’t easy. With all the recent data breaches it is so important to take the necessary steps to protect yourself and your family from those looking to complete identity theft. One incorrect credit inquiry could cause a much bigger problem for you then taking the time to prevent it now. Credit freezes aren’t the only way to protect your credit from thieves if you lifted your credit freeze or removed it fully you may want to look into utilizing fraud alerts.

 

 

Are Student Loans Impacting Your Credit Score?

 

 

Fraud Alerts for Credit Reports

If you don’t want to freeze your credit but want added security for your credit reports, try fraud alerts. There are three different types of fraud alerts: initial fraud alert, active duty fraud alert, and extended fraud alert. What’re the differences between each and what makes them different from a credit freeze?

 

Initial 90 Day Fraud Alert

 

The initial fraud alert is an alert that lasts usually around 90 days and is often used when financial information, credit card numbers, or your wallet have been stolen or even lost. The initial fraud alert gets placed on your credit report. Meaning, if someone is, in fact, trying to steal your identity they will have a difficult time because companies will be required to take additional steps to verify your identity before issuing additional forms of credit. You can place these alerts on your credit report by contacting a credit agency. Once one agency is contacted they must notify the other two U.S. credit agencies. Initial fraud alerts can be renewed after the 90 day period.

 

Active Duty Alerts

 

These alerts are designed for people who are on active military duty. They operate similarly to initial fraud alerts in that they require businesses to complete extra tasks to confirm the borrower’s identity before an additional form of credit can be issued. These types of alerts typically last about 12 months or a year but can be renewed to match the deployment period. When you contact a credit agency, it must notify the other two U.S. credit agencies. Also, according to the FTC, the credit agencies must remove your name from any marketing lists for prescreened credit card offers for two years unless you request otherwise.

 

Extended Fraud Alerts

 

Extended fraud alerts are commonly used if you have already fallen victim to identity theft. Extended fraud alerts last 7 years. In order to place this type of alert on your credit report, you’ll need to send proof of identity theft to one of the three major U.S. credit agencies. Here is a great government resource if you ever fall victim to identity theft.

 

Similarities and Differences between Credit Freezes and Fraud Alerts

 

Fraud alerts and credit freezes have some similarities and unique differences. For example, both alerts and freezes are free of charge according to U.S. federal law. Any current creditors will still have access to your credit report even if you have fraud alerts enabled or you have a credit freeze in place. If you choose to open any new forms of credit while these are enabled it could lengthen the process for the new creditor. These are the similarities but what makes fraud alerts and credit freezes different?

 

One main difference is for a credit freeze each U.S. agency will need to be contacted directly. Whereas, for fraud alerts, if you notify one credit agency, that credit agency is responsible for notifying the other two credit agencies. During a credit freeze, prospective lenders will not have any access to your credit report. With a fraud alert, prospective lenders do have access to your credit report but will need to take additional steps before issuing new lines of credit. The last and one of the most obvious differences between these two is that credit freezes don’t have an expiration date. A credit freeze can be placed on your credit report until the end of time unless you request that it is removed. A fraud alert typically will expire within a year, or seven years depending on the type of fraud alert you’ve selected.

 

 

5 Reasons to Refinance Your Student Loans

 

 

NOTICE: Third Party Web Sites
Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – The bank is not responsible for the content. Please contact us with any concerns or comments.

Responsibilities of Cosigning A Loan

It’s often thought about pretty commonly that people will attend college. What often isn’t discussed is how people will afford to pay for their college degree. When looking for available financial aid options many look to private student loans to pay for college. Once completing the application don’t be surprised if it is denied because of your financial history or lack thereof. Unless your parents opened up a credit card account for you as an authorized user when you born, you probably won’t have a long enough credit history. Don’t be overly heartbroken, since you aren’t the only one without a long credit history. A way around not having an established credit history is to talk with a parent or guardian about being a cosigner on your student loan. This isn’t an easy process, but it can be worthwhile if both parties understand the responsibilities that are associated with cosigned student loans. Additionally, adding a cosigner to a loan may not be the right answer.

 

Having a cosigner can help qualify you for a student loan because the right cosigner should have an established credit history. As a lending institution, it would be too difficult to lend to a borrower who hasn’t yet shown that they are financially responsible. Adding a cosigner who is financially responsible, for a loan assures the lender that the loan is less of a risk and is more likely to be paid back.

 

If you like sports, think of it like a basketball game. If you’re injured and can no longer play, a substitute or someone on the team plays the game in your place. A cosigner would be your financially responsible substitute in the game of loans. If you are unable to carry the financial burden of a loan at any time and take a knee, a cosigner is expected and legally responsible to repay the debt.  Though the concept of adding a cosigner can seem fairly simple, there is a lot that goes along with it. Here are a few things to understand, before you even consider asking someone to cosign your private student loan.

 

 

Why would you need to add a cosigner to a loan?

 

There are multiple different cases why you may need a cosigner. If you have never owned a credit card, had a loan before or held any type of credit, you may have no established credit history. Even if you have had credit for a short time, there may not be enough history for the private loan company to evaluate. If you have a large loan you’re interested in taking out, it’s highly unusual that the loan will be provided to someone with a year or less of credit history. Based on your credit history a student loan company can see how often a person is paying off debt and what their credit score is. Without a credit history, it can be hard for a student loan company to evaluate if you will be on time for loan payments.  With a cosigner, the student loan company can evaluate the financial history of the cosigner and see that they are a reliable applicant.

 

Another reason that you may need a cosigner is that you have a bad credit score. If your debt-to-income ratio is too high, you have an unsteady income, or you have previous defaults on your credit history, this could be a reason why you’d need to add a cosigner. A cosigner can help qualify you for a private student loan. When having a cosigner, it is the cosigner’s loan and they are fully responsible for that loan too. Though your cosigner is not using the loan, it is equally their responsibility to make sure the loan is paid off. If you choose to ask a family member or friend to be a cosigner, it is important they understand the financial responsibility that they are taking. For example, if you do not pay your loan, your cosigner will have to pay it off. A cosigner will need to have a good credit history and consistently have responsible financial habits. You may be thinking of multiple different people who could be your cosigner. Before diving in, be sure to understand who can cosign your loan.

 

Who can cosign a loan for college?

 

When evaluating the need for a cosigner, you will need to know who is eligible. Undergraduate and graduate private loans lenders have a list of criteria that a cosigner must meet. The criteria for a cosigner will be different based on each lending institutions policy and eligibility requirements. Here’s a breakdown of some of the general eligibility requirements needed.

 

  • A cosigner must be a United States citizen and of legal age.
  • Legal age will vary by state, so it is important to look up the legal age for your state of interest.
  • As for your preference, it needs to be someone you trust. Maybe start by asking a parent or close relative.
  • Needs to have a good credit score, and has to know all the financial responsibilities of a cosigner.
  • The cosigner will be required to have a consistent employer or a steady income. If a family member is not an option, consider a dependable, close friend.
  • Some private loan companies require that the cosigner have the same address as the applicant.

 

Cosigner Responsibilities

 

Make sure your cosigner fully understands what they are committing to and that you both discuss the responsibilities needed from a cosigner. Being a cosigner can be unpredictable. As a borrower, you may not be able to pay off a loan that you have taken on and your cosigner will be accountable for the remainder of the student loan payments. This could affect a cosigner and their future. Go over the cosigner paperwork and discuss all the options you have. You both will have equal responsibility throughout the life of the loan.

 

Cosigner responsibilities include payment on any late or missing payments as per the contract of the private loan. The cosigner’s credit report will show the student loan, therefore, any late payments will affect the cosigner’s credit score. A cosigner, by cosigning, is adding more credit to their credit history. Therefore, if the cosigner needs their own loan, they may find it difficult due to the additional credit added from the private loan.

 

A creditor may have different ways of collecting loan debt, but they can garnish wages depending on the state the loan is originated in. If the loan is not paid, you or the cosigner’s employer may be required to refuse a portion of your paycheck and send it to the creditor. In addition, a private loan may have clauses included in the document. Be aware that a clause may require the loan amount paid in full at the time of a cosigner’s death. Meaning if you ask someone to be a cosigner and they pass away the debt may have to be paid in full at that time. The same can go for the cosigner if the borrower passes away, the full debt balance could be expected at the time of the borrower’s death. Open communication between you and your cosigner is vital. Go over all clauses, liabilities, and possibilities to ensure you are both aware of the circumstances.

 

Factors to consider when selecting a cosigner

 

A cosigner needs to be someone who is completely able to pay off your loan. The private loan company will want to see that the cosigner has a steady income. A steady income means that they have reliable employment or a consistent form of payment. Without a steady income, the loan company will have no evidence that your cosigner has the funds to help pay off the loan.

 

Your cosigner will need to have a decently lengthy credit history. Along with the cosigner’s credit history, the lender will review their credit score. A credit score will illustrate to the loan company that the cosigner has borrowed money previously and was able to pay it back on time. A private loan company is always looking for a trustworthy candidate that will be capable of paying back their debt. While the loan company will decide if you and your cosigner are qualified, it is important that you have a dependable cosigner.

 

Cosigning will be a long term commitment and all clauses must be considered. Good health will be a factor when choosing a cosigner. Good health may seem like an odd qualification to have. If your cosigner dies, your loan could automatically be placed in default regardless of the payments you have made. Due to unfortunate circumstances, this could have a harmful effect on your credit score.

 

Whether it a relative or close friend, you and your cosigner must be on the same page. Once you have a loan you both will share the responsibility of getting it paid off. Talk about financial barriers together. If you are unsure you can pay off the loan, let your cosigner know ahead of time. This could help prevent any devastating effects on your credit scores in the future.

 

Benefits of using a Cosigner

 

While having a cosigner is a serious decision, it does include benefits. One of the biggest advantages to adding a cosigner is that it could help you to have a better interest rate. Adding a cosigner with a good credit history, and income, private loan companies may give you a lower interest rate. How can having a cosigner get you a lower interest rate? Since your cosigner should have an established credit history and income, it means that the loan is less risky for the lending institution. If the loan is more likely to be paid back based on previous borrower history, then the lending institution will provide a more attractive interest rate on the loan. Having a lower interest rate on your loan could mean thousands of dollars saved from debt repayment.

 

Secondly, having a cosigner could assist you with your own credit. Since a cosigner gives you a better chance at receiving the loan, you’re more likely to establish the credit to further build out your credit history. Assuming you’re able to make the monthly payments on your student loan, you will start to build a credit history. If you are paying on time, this will help you to improve credit for future needs and purchases for both you and cosigner. Without a cosigner, you may not be eligible for the loan and would not be able to get a jump start on your credit. Cosigning for a debt is not something that should be taken lightly by anyone. This could be the right answer for you or it could be the wrong answer. It’s important to review all your options as a borrower and discuss the liabilities and responsibilities of cosigning with your cosigner.

 

10 Facts About Student Loans That Can Save You Money

 

How to Build Credit While in College

As a child, it’s not uncommon to think that there are monsters hiding under your bed or maybe in your closet. You never actually think it through as to what really could be hiding but it’s something scary. Trust me, you didn’t want to ever have to come face-to-face with it. Thus, my reasoning for staying in bed every night and never moving. Oh, and of course hiding my arms under the blankets. You know you did it too! Well, at twenty-eight I think I’ve finally met those monsters.  It was my credit!

Throughout my life, I was terrified of credit. I, like many others, was taught credit cards lead to lifelong debt and it could ruin my life. Not only that but any minor change like closing a credit card account affected my credit score – SCARY! Credit, like most new things in life can be intimidating or maybe even scary, but we have to start somewhere.

What most people, myself included, don’t understand about credit is that it can be a great thing when used responsibly. A good credit score can help with getting a house or buying a car. I now understand that credit is not a scary thing. Credit is only something you need to be responsible with. If you are a college student looking to build credit purchase only things that you can pay for. If you cannot guarantee that you can stay on top of payments, you shouldn’t be making purchases.

While in college, if you decide to build credit it can help jump-start your life after college. Filling out applications with your credit score will be easy because you’ve already started building credit.  In college, credit can be built through everyday expenses and can benefit you in the long run. Here are some simple ways of building credit that will not break the bank or “ruin your life,” but help you in the future.

Find a Credit Card

While in college, you may see a credit card offer dropped in your mailbox every week. Actually reading through the information and what the card offers is KEY. Look at interest rates and cash back rewards. Some cards have cash back rewards on points earned by using the card on things such as gas and groceries. By using a credit card for necessities and paying it off, you are earning easy credit while still in college.

Some cards offer cash back opportunities on travel. If you’re going away to college, using a credit card could be a great way to earn points for a visit back home or a weekend getaway. Remember, use a credit card on things you will be able to pay back on time. This way you will be building credit while also gaining reward points to redeem on things you want to do.

If you’re attending college you may want to check out student credit cards. Student credit cards can be a really great way to start building credit while you are in school. Be warned that you will still need to demonstrate a decent salary to qualify for a student credit card, simply being a student is not enough. Most student credit cards will not charge an annual fee and many offer additional perks.

 

Learn How Completing College Early Can Save You Money

 

Secure Credit Cards

If you don’t qualify for a student credit card or any traditional credit card because you don’t have a credit history look into secure credit cards. They work just like other credit cards but require a cash deposit, first. This deposit is usually in the hundreds or low thousands. If you make every payment in full and on time you’ll receive back your down payment. If you do not make payments on time or in full the lender keeps your down payment.

Rent

While being in college you will likely be moving into your FIRST apartment. An apartment can be a great way to start earning credit. Putting the rent in your name and paying it on time can assist in building credit. In order for rent to go towards your credit history, your landlord must be reporting the rent payments to one of the credit agencies. If your landlord isn’t reporting your rental payments it will not help you to build a credit history. In today’s society, it is also pretty uncommon for landlords to report rent payments to a credit agency.

If your landlord isn’t reporting your rent payments to a credit agency it can’t hurt to ask if they could start! When sharing an apartment with roommates, it is vital for everyone living there to pay their share of rent on time. Finding roommates that share accountability is important when you are building a good credit score.

Get a Credit Builder Loan

A loan that is in place to IMPROVE CREDIT?! Sign me up! When you have a credit builder loan, you make payments into your savings account. After one year, you will get the amount you paid back and increase your credit score! A credit builder loan does not require good credit to begin, you just have to show proof of income. Start by applying for a credit builder loan, and begin to make payments on time. In order for you to be benefiting from a credit builder loan, you must be paying on time. The pros to a credit builder loan include getting the money you put in and having a better credit score at the end of the year!

Become an Authorized User

Becoming an authorized user is a smart and easy way to embark on creating credit while in college. Being an authorized user means that you can use another person’s credit card and your name will be included on the account. The process simply has the account user add your name to the credit card account. As an authorized user, you will not be responsible for paying back debts on the credit card. This responsibility will legally be in the original account holder’s name. The main goal for being an authorized user is to increase your credit score by having an account holder with an outstanding credit history. If you have an account holder who is known for paying their debt on time, this will increase your score, because you’re on the account. Keep in mind that you should ask someone who is trusted and reliable when becoming an authorized user.

Start on Student Loan Payments

As a former college student, I know that going to school full time while working enough to have money to start paying off student loans can seem impossible. Remember, you do not have to pay off large amounts right away. While in college, consider putting money aside to start paying off loans when you can.

If you start loan payments early you will start to see positive growth on your credit score. The benefits of having student loans include helping build your credit score. If you decide to start paying off loans while in school, it will be before your loan deadline and will create less to pay off later. Even if you are not able to pay off large sums, these small amounts can make for fewer payments later on and a better credit score when you graduate from college.

Credit Utilization

A top way to build credit is not to utilize all the credit that is available to you. For example, if you have a credit card with a credit limit of $2,500 and the balance is $2,500 that would be 100% credit utilization. Credit utilization is important because it impacts your credit score. The maximum recommended credit utilization is about 30%. Therefore, if your credit card had a maximum limit of $2,500 then 30% of that would be $750. In this example, to avoid negatively impacting your credit score you should not spend over $750 on your credit card.

It can be difficult to be disciplined as a college student, but it’s important to remember that this money is not free. It’s also likely that this is probably your first credit card ever! Exciting, but this is a really important rule of thumb! This is a credit that you will eventually need to pay back. In an effort to build credit you want to be sure you’re creating good financial habits for yourself too. Be sure to stay disciplined and not utilize over 30% of your credit card.

BONUS: Credit Reports

While we are on the topic of creating good financial habits, the number one habit you can create is looking at your credit report. If you talk with any financial expert, this will be their number one piece of advice! Yearly, check your credit score and your credit report. Think about it like an annual physical at the doctor, but for your finances. Review your credit report to make sure that there are no errors or fraud to your credit history. If you visit AnnualCreditReport.com you can receive a free credit report from all three major credit agencies in the U.S. and a free credit report can be requested every 12 months.

Having paid off debt or using credit in college will prepare you for future payments on cars, houses, and throughout your adult life. Knowing your responsibilities and taking care of payments on time is key to achieving a better credit score by the end of your college career. Consider these options when deciding how to build credit and choose one that will benefit you in the long run.

 

Are Student Loans Impacting Your Credit Score?

 

NOTICE: Third Party Web Sites
Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – The bank is not responsible for the content. Please contact us with any concerns or comments.

What Credit Score is Considered “Good”? What to know about Credit Scores

This guest post was provided by Debt MD ®, a free service that connects consumers with the professional help they need to become debt-free. Debt MD aims to make the path to financial freedom as quick, simple, and stress-free as possible.

A good credit score is becoming more important. A good credit score illustrates to lenders that you are a responsible borrower. There are three major credit bureaus that report on your credit history and determine your credit score.  The higher your credit score, the more you’ve established yourself as a responsible borrower. The higher your credit score the more likely it will be to receive favorable interest rates and loan terms.

 

Did you know credit scores can be requested from other organizations outside of the financial industry? Credit scores not only illustrate responsibility as a borrower but provide a snapshot of how you handle finances. When you want to establish services like a phone, utilities, insurance, or even rent an apartment, providers look at your credit score. This allows them to choose whether they should allow you to obtain their service or not. Even employers are now looking at credit reports prior to hiring someone.

 

Who Determines a Credit Score? 

What’s a three-digit number that can either make or break your financial deal? Yes, you got it right, it’s your credit score! There are several different types of credit scores generated using your credit report. So, in simplicity, you determine your credit score, since you control how you utilize your credit and finances.

 

A credit report is just that a report on your credit history. It includes details regarding credit card payments, loan payments, and the status of each. Your Credit Score is then calculated using your credit report. Most commonly used is the FICO® score developed by the Fair Isaac Corporation.

 

What Makes Up a Credit Score?

 

The FICO® Score is the most widely used credit scoring model. In fact, according to Fair Isaac Corporation FICO® Scores are used in 90% of United States credit lending decisions. FICO® Scores are calculated using five main parts of your credit report. The FICO® Score utilizes amounts owed, new credit, length of credit history, payment, history, and credit mix to calculate your personal score.  Each category represents a percentage as illustrated on the chart below, to create your full FICO® Score.

 

What’s a Good Credit Score?

 

We now know what a credit score is, what attributes to it, and the main type of credit score used throughout the lending industry, but what is a “good” credit score? Generally, FICO® Scores range from 300 to 850.

 

Here is a look at the FICO® Score ranges and their equivalent rating.

 

Credit Score Range: Rating

300 to 579: Very Poor

580 to 669: Fair

670 to 739: Good

740 to 799: Very Good

800 to 850: Exceptional

 

It is important to note that a “good” credit score cut-off will vary depending on the type of financial institution that you are dealing with. For instance, if you are applying for a mortgage loan, to qualify your score typically must fall between 700 and 759. To qualify for an auto loan your score would ideally be above 740, and to get the best rewards credit card you typically should have a score of 720. If you’re looking to refinance student loan debt you’ll likely be required to have a 650 credit score or higher.

 

It’s important to recognize that lenders do not solely base their decision on credit scores. In addition to your credit score, lenders may look at your credit history, debt-to-income ratio, assets, and liabilities to determine if you’re a good risk or not. The higher your credit score the better, as it illustrates your reliability as a borrower hence presenting a lower risk to the organization. When a person has a higher credit score they likely will be presented better borrowing options due to their credit history.

 

How To Find Your Credit Score?

Checking your annual credit report regularly is one of the most important habits to develop. This is especially true if you want to improve your credit score. By verifying your credit record, you’ll be able to check for errors and discrepancies and dispute them when applicable.

 

Checking your credit reports will also help you to recognize signs of identity theft, which is becoming more prevalent. You can get your credit report at no cost once every 12 months from each of the three widely recognized credit bureaus (Equifax ®, Experian ® and TransUnion ®) from AnnualCreditReport.com.

 

7 Money Mistakes to Avoid

 

NOTICE: Third Party Web Sites
Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – The bank is not responsible for the content. Please contact us with any concerns or comments.

 

Tying the Knot on Credit Scores

Credit scores show institutions that may lend to you, if you’re a responsible borrower. It takes time to build credit and once you have, it’s important to keep it. If you aren’t sure how to build credit, check out our building credit blog here. When dating or in any type of romantic relationship, there are certain things about each other we learn pretty quickly. What our partner may like to eat, their favorite type of music, who their friends are, what’s their best angle for a selfie. We’re willing to bet that learning your partner’s credit score isn’t usually at the top of that list.

As your relationship progresses and you look to the future with your partner, your credit scores must be discussed. It’s important to understand where you both stand with your credit and how, or if you both can improve your scores. The importance of good credit cannot be underestimated. Credit is key to determining your ability to borrow money or to take out a loan, so having good credit, both you and your partner, will leave you both with better options. You both will have the ability to select a loan such as a mortgage for a home or a credit line to pay for your wedding that may even benefit you both in return! So how can you work with your significant other to raise their credit score and secure your financial futures?

Education & Open Communication is EVERYTHING

If you have great credit, you must be doing something right! Take the opportunity and show your partner what they can be done regularly to improve their credit score. It’s important to keep in mind you shouldn’t shame your partner for their finances in the past. Remember, it’s likely that your partner did not even realize how important a credit score was!

Your partner needs to feel like they can openly address financial questions and you can both have an open and honest conversation. Try to be encouraging and share your knowledge with them. Educate them on how reviewing a credit report annually to make sure there are no mistakes is important. Sit down together and walk through the first one together.

Be sure to find the problems that caused the poor credit in the first place. Was it missed payments, maxing out of credit cards, or just a lack of any credit history? Together you both can work to find a solution to this problem. There are tons of resources on the web where people can go to learn more and become more financially literate.

Build Trust

If you have good credit and you trust your partner, we mean really trust your significant other, then add them as an authorized user on your credit card. If this is something you’ve really thought about, be sure to use protection. By “protection” we mean, you’re still the primary cardholder and all responsibility of the card is all still yours.

One small slip-up can leave you with an unfortunate looking future … well at least as far as your credit score is concerned. If your partner decides to cheat on you financially and use the card to make purchases that they can’t afford and you don’t have the funds to pay for them either – it can negatively affect your credit score.

Now back to the positive of adding your partner onto your credit card. As the primary cardholder, your credit will not be affected if you add an authorized user. Your partner’s credit report will show the account history. Therefore, if you haven’t missed a payment on the card and haven’t maxed out the available credit, your significant other will get to reap those benefits. This is especially beneficial for partners who lack credit history.

Work for it

Another way in which your SO can build or repair their credit would be to open up a secured credit card. As NerdWallet explains, it is a secured credit card based on a cash deposit that you make when you open the account. They also explain that people who choose this option generally see their credit score improve in about a year if done responsibly. The deposit is usually the credit limit to which you are permitted. For example, if you put down a deposit of $500.00, you would have a credit limit of $500.

Now, don’t think because you put a deposit down you won’t accrue interest. Every other aspect of a secured credit card works the same as an unsecured credit card meaning if there’s a balance you’ll be paying interest. Secured credit cards are also accepted wherever unsecured cards are accepted.

Here are some additional tips to using a secured credit card responsibly as per Nerdwallet:

  • Make only 1 or 2 purchases per month
  • Only use for small purchases
  • Pay the full balance every month – to not collect interest
  • Pay the balance before it’s due.

If you keep the account open and pay your bills on time, you’ll eventually get back your deposit. With a good payment record on the account, most secure card providers will offer the account holder an unsecured card. If you don’t make your payments, then the cardholder will take the deposit, hence why it is a secured card because it is secure for the lender.

The Future

As every couple is unique so too are their credit histories. Whether it’s you or your significant other looking to repair or build credit. We just reviewed three proven methods. It’s important to keep in mind that not all credit is approved. You’ll still need to qualify for most of these options except for the authorized user on a credit card. Remember, this is your financial security as a couple. Your financial security will lay the foundation for the decisions you choose to make regarding finances. Keep working together to reach your goals and we are sure you’ll be so glad that you did!

Learn How to Talk With Your Partner About Finances