Word of the Day Wednesday: Credit Report
Each Wednesday, MEFA will feature a Word of the Day where we'll highlight a word (or sometimes a phrase) related to the college planning process. This month, we're focusing on vocabulary related to college loans.
Today's Word of the Day is Credit Report.
An individual's credit report includes the complete list of the credit cards and loans under that person's name, with information about each account, including the date it was opened, the credit limit, and payment history. All of these details together constitute a person's credit history. A credit report is intended to provide insight into how well an individual manages money and pays back outstanding debts. Credit reports are maintained by three different credit reporting agencies, Equifax, Experian, and Trans Union, who produce these reports by collecting financial information about individuals from different lending entities, including banks, credit card companies, and collections agencies.
When an individual applies for a private loan, the bank or lender will reference that person's credit report. If the individual is a student with no credit history (common among traditional students), the lender will check the credit report of the co-borrower, often the parent or another family member. The lender will make the decision of whether or not to grant the loan based on the strength of the borrower's credit report. Borrowers who have had trouble paying back debts on time may not be approved for a loan.
Why does this matter to you?
If you're planning to borrow a private loan to pay for college costs, it's important to understand the personal information that will be used in the decision process to lend you a loan. We encourage you to request a copy of your credit report and to review it for accuracy. If any data on your credit report is incorrect, work directly with the credit reporting agency to update the information. All individuals are permitted to request a free credit report once a year from each of the three main credit reporting agencies on AnnualCreditReport.com.
For more information about credit reports, visit the Federal Trade Commission site here. And be sure to tune in to next week's Word of the Day Wednesday where we'll build on this topic and cover Credit Score.
As you make your plans to pay for college, reach out to us here at MEFA with your questions. You can find us on email, Twitter, Facebook, or over the phone at (800) 449-MEFA (6332). And if you would like to apply for a MEFA loan, visit our loans page here.