Repair Your Credit Profile

College students need to know about credit

Charlie Gibson was pre-approved for a Visa credit card when he was 18-years-old.

The Grosse Pointe freshman’s father encouraged him to use it to build credit, as long as Gibson made sure he could pay it off every month.

The one thing he wasn’t told much about was his credit report.

“When I got my credit card, my parents just explained to me how important it was to pay it off every month,” Gibson said.

“They never really explained to me the importance of a credit report.”

Potential lenders use credit reports and credit scores to help predict whether a person is a good risk to repay a loan and make payments on time.

Creditors use credit scoring to evaluate people’s credit records with information pertaining to annual income, outstanding debt, bill paying history and the number and types of accounts a person has open and for how long.

“Credit is an important thing, and it stays with you for a long time,” said Gene Stout, finance and law professor.

“Students need to be aware of that and remember that debt is not short term.”

Arguably the most important aspect of a credit report is the Fair Isaac Company score.

A FICO score ranks a person from 300 to 850 pertaining to how good his or her credit is.

People with scores of 750 or above fall in to the excellent category and can get the lowest interest rates, while scores less than 620 are risky for lenders.

Scores are given through a series of categories such as payment history, amount currently owed to lenders, length of credit history, the number of new credit accounts applied for and the mix of accounts.

Livonia junior Ashley Maurer said she doesn’t know much about credit scores even though she has had a credit card for two years.

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