Cover Story: Credit Score Concerns

Student loan borrowers are being alerted that their credit scores could soon suffer if they don't start making payments on their defaulted loans that the federal government started collecting again this month.

According to the Department of Education some five million borrowers are being affected.
Missing loan payments are big factors that can effect your credit score.

Do you know your score?

"It ranges from 300 to about 850. The higher the better!" said Kelcie Schiraldi of Bury Financial.

And what make it go up and down?

"65% of your fico score is based on two factors only: reducing debt and paying it on time," said Vic Russell of Apprisen Financial.

Your credit score begins once you start having and paying bills...bills like credit cards and car loans.
Pay them on time your score goes up. A good score is over 700.

Miss a payment and they go down. Do that a lot and they go way down. And that's a bad thing.
It means higher interest rates on things you want to buy and have to get loans for, like cars, homes or even furniture.

"A lower interest rate, even if it's a quarter of percent or half of a percent, it doesn't sound like much but if you are borrowing a lot of money over a long period of time that could add up to thousands of dollars of savings over time," said Schiraldi.

A bad score can even effect where you live.

"We have found that even landlords now if you go to rent an apartment, they are going to run your credit score. A lot of them do. Again, to determine if you are a risk to them. we've also seen employers they are interviewing candidates, they will run credit scores on the people they are interviewing," added Schiraldi.

If your are responsible with your finances you are usually then considered to make a good employee.
So how do your get your score back up? Re-establish credit by getting a secured credit card and pay it off each month. And you need to pay all your bills on time.

"Lenders just want to see a payment history, a positive payment history on something. The sooner you do that the more you'll see a kick in your credit score," said Russell.

You can start to establish good credit by getting a Credit card for late high school or early college students. Parents can co-sign and make their child an authorized user.

"Take a bit of risk, get a credit card but be very careful about paying it off, ideally, every month and that is by far the best way to build your credit over time," said Schiraldi.

And be sure to get a free copy of your credit report each year.

"You need to know your blood pressure, you need to know your cholesterol count, you need to know your credit score. As far as your personal financial management and the cost of things you're going to accrue are all dependent on that score. You have to make sure that credit report is accurate and your score is as high as it can be," said Russell.