When applying for loans or credit cards, the make-it-or-break-it factor lies within credit scores.

When applying for loans or credit cards, the make-it-or-break-it factor lies within credit scores. But some students do not know what goes into their scores.

Sophomore finance major Olivia Blatt said she uses credit cards, but doesn’t know the exact number of her credit score.

“I know it’s good, though, because I’ve never made any late payments,” she said. “I’ll figure out what it is eventually, but I don’t have a set idea of when that will be.”

It takes years to build good credit such as Blatt’s, but with just a few late payments, students’ credit scores can drop significantly, delaying their chances of obtaining loans.

Knowing the basics of credit scores and maintaining a good score in college can save students money and serve as the groundwork for a financially responsible future.

What is a credit score?

A credit score is a three-digit number that shows a person’s credit capabilities.

It is calculated from an algorithm used by three credit reporting agencies — Equifax, Experian and TransUnion — to determine the amount of potential risk for lending people money, said Kelly Paton, program coordinator for Consumer Credit Counseling Services, a program of Family and Community Services in Ravenna.

How is a credit score determined?

Paton broke down the five contributing factors that determine a credit score based on the score estimator by FICO, the company that created the credit-scoring model:

35% is payment history — making payments on time, any legal actions against a person in relation to money, such as bankruptcy or garnishments and the total amount past due.

30% is amount owed — the available credit being used and if credit cards are maxed out.

15% is the length of credit history — how much time since a person established his/her first credit account, how long a person has had loans established, such as a car loan or a mortgage.

10% is the type of credits used — these include credit cards, home loans, personal loans, car loans, mortgage, etc., and shows how a person manages different types of payments and responsibility.

10% is any new credit applications a person has requested — how many credit applications a person applies for, and how many times someone looked at a person’s credit report to make a decision about a loan.

Based on those factors, creditors report a person’s information to the three credit reporting agencies, and then those agencies compile the information and publish the report.

The information provided in that credit report determines a person’s credit score, said Greg McBride senior financial analyst for Bankrate.com.

“Your credit score is based on five different factors, but the two most significant are paying your bills on time and the amount of debt you have,” McBride said.

Both Paton and McBride said a legitimate Web site students can use to obtain their credit reports is www.annualcreditreport.com. They can get one free copy of their credit report from each of the three credit reporting agencies every 12 months.

The reports from the Web site do not include credit scores, but gives the option of purchasing them.

People must give their social security number, date of birth, street address and other information specific to their reports.

What determines a good or bad credit score?

“A good credit score is reflective of a consumer with a low risk of fault, and is based on a solid track record of handling money,” McBride said.

Paton said the higher a credit score is, the better interest rates and fee structures a person will get when paying for loans and credit.

She added that there are other services that base their decisions on credit scores, such as car insurance rates and the ability to get a cell phone plan.

The lower the credit score, the more interest a person will have to pay on the same types of loans someone with a high credit score can get for less.

Students may not qualify for credit with a majority of the lenders out there, Paton said.

“Creditors today are being much more restrictive in lending money, based on the current economic situation,” she said.

Is there an ideal

credit score?

The FICO scale ranges from a low of 300 to a high of 850. McBride said anything above 680 is considered to be good credit — a score of 700 is good credit but leaves room for improvement, and those in the 800-range have no worries.

“Most people have a credit score above 700, but the fact is, you have to try hard to have a credit score below 650,” McBride said. “If your credit score is below 650, you’ve stepped out of bounds somewhere — you have very high debts, you’ve made late payments or defaulted on obligations before.”

Paton said creditors today are generally looking for anything above 700.

What should

college students focus on with their own scores?

It is important for students to focus on building their credit, but McBride and Paton said it’s not particularly adamant they know what their credit scores are in relation to knowing what is on their credit reports.

“If you’re going to apply for a loan, it’s good to know where you stand and what your negotiating power is, but I think that for a lot of college students, they may not have had the chance to build much credit history, so to pay $8 or $12 for a credit score isn’t going to help too much,” Paton said.

She added that the priority of students should be managing and building the credit they have by making payments on time and making more than minimum payments.

Students should also know that their parents’ credit scores can affect their ability to take out a loan, but only if the parents apply for a loan to help pay for school, or if they cosign on a loan.

“But it’s not genetic — it’s not something you inherit, so just because mom or dad may have a poor credit score doesn’t mean that you will,” McBride added. “Your credit score is yours and yours alone.”

How do you maintain good credit?

The fundamentals of a good credit score are found in the people who keep their borrowing in reason, have track records of repaying what they borrow and make payments on time, McBride said.

“Auto insurance companies, respective employers and respective landlords will all check either your credit score or your credit report, so credit worthiness is often seen as a reflection of your character,” he emphasized.

How can you completely ruin your credit?

If students “bite off more than they can chew financially,” at some point they won’t be able to make their payments, Paton said. With payment history playing the biggest role in credit scores, making late payments will bring the scores down significantly.

Paton added that applying for a lot of accounts, filing for bankruptcy or having a civil suit against a person based on money can also bring down credit scores.

“Credit scores are like a reputation — they take a long time to build up, but they can be destroyed very quickly,” McBride said.

Contact student finance reporter Courtney Kerrigan at

[email protected].