Why Is Your "Credit Score" Important?

The Basics

Credit Issues

 Families may be seeing reports in the media which speculate about the impact of the subprime mortgage credit crisis on the availability of students loans. Please review the information in this section for more information.

Lenders normally look at your past history in repaying consumer debt in determining the interest rate that they will charge on a private student loan. Major lenders often utilize your "FICO" score.

Credit bureau scores are often called “FICO scores” because most credit bureau scores used in the U.S. are produced from software developed by Fair Isaac and Company. FICO scores are provided to lenders by the major credit reporting agencies.

National distribution of FICO<sup>®</sup> scores
 

FICO scores provide the best guide to future risk based solely on credit report data. The higher the credit score, the lower the risk.

Most lenders will offer a lower interest rate to students who have a "credit-worthy" individual willing to co-sign their loan application. An individual who co-signs your loan application will be held legally responsible if you fail to repay your student loan.

Credit Card Act of  2009

Most provisions in the Credit CARD Act of 2009 are effective February 22, 2010. The reform legislation, signed by President Obama in May 2009, place new restrictions on credit card fees and interest rate policies. Read More about these changes

  How Long Does Information Stay on Your Credit Report ?

What
How Long on your report
Positive Information
Indefinitely
Bankruptcy
10 years from the date of final order
Late payments
7.5 years*
Accounts sent to collections
7.5 years*
Other Negative Information
7.5 years*
Lawsuits or Unpaid Judgments
7years or more
Tax Liens
7 years from the date of payment
Information in response to a job application where the salary is over $75,000
Indefinitely
Information reported because of a credit or life insurance application for over $150,000
Indefinitely

*The seven years starts running from the date of first delinquency, which generally means seven and a half years from the date of last payment.

 

Updated April 22, 2012