Shhhhhh!! Leave me alone! It’s exam time! I’m trying to study!
It’s definitely that time of the semester. Everyone is hunkered in their own preferred way…cramming in last minute knowledge (and coffee and chocolate) for the dreaded law school exams. You give it that much attention because it’s simply that important. It seems like your entire future rides on every single exam question.
Your money deserves that same level of attention. Because your entire future really does ride on how you manage your finances. If you are lazy and sloppy with your money, you will end up paying a price. Late payments, overextended credit cards, overdrawn bank accounts, and bounced checks are more than just an embarrassment. These things can hurt your credit score. And a bad credit score comes with consequences. If you have bad credit, you may have trouble getting a Grad PLUS Loan or a private educational loan to help you pay your living expenses while you are in school. When it’s time to buy a car, you may not be able to secure a loan. You may not be able to rent an apartment without getting someone to co-sign for you. You may pay more for car insurance. You may have to pay a deposit in order to have utilities connected. You’ll pay much higher interest rates on credit cards, private educational loans, car loans, and home mortgages…if, in fact, you are able to get approved for them at all. And worst of all, if your credit history is challenging enough, you may run into trouble with the character and fitness portion of the bar exam application. That’s a lot of scary consequences for simply not giving your money the attention it deserves.
Think of managing your money as an extra class you are taking. Give it a certain amount of time each week. Use a spreadsheet or some other program to manage your budget. Write down when your bills are due so you don’t miss any deadlines. Read your mail and email—it could actually be something important. Check your accounts online regularly so you aren’t facing any surprises. Something as important as the funding that makes your life work deserves the same attention you would give an exam or a paper.
Shhhhhh! Leave me alone! I just got paid! I have to work on my budget and my bills!
For years it’s been possible to access a free copy of your credit report each year. And that’s wonderful. You can see all of the different inquiries, all of the different accounts, and anything that may be good or bad about your credit. All by visiting http://www.annualcreditreport.com. But the missing piece of the puzzle has been the credit score—the number that most credit providers use to determine how much you have to pay to use their money…if they’ll let you use their money at all. That score we’ve always had to pay for. Until recently.
It all started with Discover. It was about a year ago that Discover started providing their customers with a free credit score. I was very hopeful at that point that other credit providers would follow suit. And it has happened. This week I got an email from Citibank telling me that I now have access to my credit score for free if I log into my account there (I am a customer there…this isn’t something they’re offering to everyone). I logged in and was pleased to find a score that made me happy. And Citibank isn’t alone. Others are following suit. Chase and Bank of America have announced that they too will be offering free credit scores to some of their customers. Even student loan lender Sallie Mae has jumped on board, offering free scores to their private student loan customers.
Is a free credit score a good enough reason to choose one bank, credit card, or student loan over another? Absolutely not! But it sure is a nice perk if a money lender you work with is offering this to you for free.
Why is it important to know your credit score? Because others are looking at your credit score. If you apply for a credit card, they look at your credit score. If you apply for a private student loan, they look at your credit score. If you put in an application on a new apartment, they look at your credit score. If you have car insurance, they look at your credit score. If you sign up for a utility (for example, connecting the electric in your apartment), they look at your credit score. It seems like everyone is looking at your credit score. And if everyone else knows what your score is, shouldn’t you? Luckily it’s now a lot easier to find out what it is!
Lately I’ve been seeing TV commercials for the Discover card, boasting that they now provide the card-holder’s credit score right on the monthly statement. What a great idea!!! And apparently Richard Cordray, Director of the U.S. Consumer Financial Protection Bureau, agrees.
Most people don’t seem to worry about their credit report/credit score until they are trying to borrow money…when it may be too late to do anything about it. But it’s something that can affect you all the time. Did you know that car insurance companies may factor in your credit history when determining the rate you pay? Seems they’ve made the connection that risky behavior in your finances may be indicative of risky behavior on the roads. Not to mention all the bad things you could be missing on your credit in the case of identity theft. You just really need to keep an eye on things.
Several years ago it became a lot easier for Americans to check in on their credit. A free copy of your credit report from each of the three major credit bureaus (Experian, Equifax, TransUnion) is available to you each year through the website http://www.annualcreditreport.com. But these reports do not include the elusive credit score. That will cost you a fee of about $8 per bureau.
The credit score is a method of translating a whole credit report, which includes listings of every credit account you have and what your payment history is like on those accounts, into one easy number that is indicative of your financial behavior. It’s kind of like translating your whole college transcript into a simple grade point average number. It gives a quick and dirty picture of what is typical financial behavior for you.
So if it’s the best quick measure of your financial performance, why can’t you get the credit score for free? I wish I knew. But Discover has taken a step toward rectifying that situation, and I’m hopeful that other credit card providers will follow suit in the near future. In the meantime, you can get a reasonable credit score estimate (as well as a lot of really good information) through http://www.creditkarma.com. It’s worth checking out.