What is my credit score? Why is it important? How do I check my credit report?

What is a credit score?

A credit score is typically a three-digit number based on your financial history to analyze and determine your creditworthiness. The higher your score, the better off you are! Credit scores are used by lenders (banks, credit card companies, etc) to gage your financial responsibility based on your past financial behaviors. Credit scores are calculated from information in your credit report. Things that affect your credit score, both positively and negatively, are paying bills late or on time, the type of credit you use, how much credit you have available to you, how much you owe on your credit cards and loans, how long you’ve held outstanding credit (how long you’ve had a credit card, for example), and whether you’ve had a lot of inquiries from prospective lenders.
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Are you liable for charges made on your credit card after it has been lost or stolen?

Under the Fair Credit Billing Act (FCBA) the most you can be held liable for when your credit card has been stolen is $50. However, if you report the loss before your card has been used (or the fraudulent charges involve your credit number and not the card itself) under the FCBA you are not liable at all and do not have to pay the card issuer any money. But if a thief uses your card before you are able to report it missing, the most you will be liable for is $50.

It is a good idea to watch your billing statements carefully in the months after your credit card goes missing. If any charges appear that you did not make, be sure to contact the card issuer immediately.
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What do I need to know about the borrowing process?

Many students and families rely on borrowing to finance their education and Federal student loans are often the primary source of these funds.  The Office of Student Financial Aid (OSFA) encourages students and families only to borrow when it is a necessity, rather than borrowing as a convenient way to finance their educational expenses.

Once a student and family make the decision to finance their educational expenses through borrowing, it is important they make informed and educated decisions about the type of loan(s) to borrow and the amount of borrowing required to pay their educational costs.  Factors that should be considered and discussed throughout this process include: understanding what is means to be a responsible borrower, understanding the types of loans available and the application process for each, and understanding the repayment requirements and options for any loans borrowed.
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What is the difference between federal and private loans?

In addition to Federal student loans, there are alternative educational student loans available from private lenders.  These programs are meant to supplement federal and state aid if you have exhausted all other sources of funding for your education.  Student and families are encouraged to use Federal loans since they usually offer borrowers lower interest rates and have more flexible repayment terms and options than alternative student loans.

An alternative student loan is a nonfederal loan, made by a private lender such as a bank, credit union, state agency, or a school.  The private lending entity provides valuable information about the alternative loan process and interest rate calculations.  This information should be carefully reviewed.

What should I know and expect about repaying my loans?

Understanding the details and commitment of student loan repayment is perhaps the most important aspect of the process.  It is important to understand when repayment will begin, where payments should be sent, what repayment plan is most appropriate, and what happens if a loan payment is not made or cannot be made.

For alternative student loans, the repayment process is determined by the private lender or servicer.  The private lender or servicer will need to provide this information to the borrower.

When does Federal student loan repayment begin?

You don’t have to begin repaying Federal student loans until after you leave college or drop below half-time enrollment.  Your loan servicer will provide you with a loan repayment schedule indicating when your first payment due date, amount of each payment, number of required payments, and frequency of payments.  The repayment process usually occurs after a grade period, allowing you time to secure a job and have earnings to assist in the repayment process.

For alternative student loans, the repayment process is determined by the private lender or servicer.  The private lender or servicer will need to provide this information to the borrower.

What Federal repayment plan is most appropriate?

A variety of repayment plans are available to borrowers and borrowers should look at each plan they may be eligible for and determine monthly and overall payment amounts.  The following list provides an overview if the types of repayment plans available for Federal student loans.

Standard Repayment – This is considered the default repayment plan and uses a level and fixed payment amount over 10 years.

Graduated Repayment – This plan allows lower early payments, followed by higher payments later in the repayment process.  Payments usually increase every two years.

Extended Repayment – This plan allows an extended repayment period for level and fixed payments, up to 25 years, instead of 10 years under standard repayment.

Income Based Options – Several repayment plans use a combination of your debt level, gross income, and/or family size to determine the payment amount.  Your payment amount under these plans will change as your income changes.