As the measure of your ability to or likelihood of paying your bills, credit plays the major role in being approved for most loans. Creditors judge the amount of risk they might take in extending you credit, and they use your credit behavior to do so. Almost all credit issuers, from mortgage lenders to student loan lenders to credit card issuers, to cell phone companies to gyms, report monthly to one of the three major national credit reporting agencies. This information becomes a part of your credit history from which a credit report is derived.
Therefore, establishing and maintaining good financial credit is very important, now and throughout your life. Good credit can open up opportunities for you – education loans for law school, the ability to make large purchases such as a home or car, renting an apartment, even landing a job you want. Bad credit can limit such opportunities.
Credit Reporting Agencies
The three major national credit reporting agencies are:
You may request one free copy of your credit report every 12 months. (For more details, go to www.ftc.gov to look up the Fair and Accurate Credit Transaction Act of 2003 or go to annualcreditreport.com.) As of July 21, 2011, if you are denied a loan or don't qualify for the best interest rate, the lender must send you a free copy of the credit score it used to arrive at that decision. This new rule applies to any type of credit-related decision that uses information contained in your credit report. For example, if your prospective landlord used a FICO credit score to determine that you must pay several months rent in advance, the landlord would be required to disclose what score was used.
We strongly recommend that you check your credit before assuming it is good. Mistakes can be made. This is especially true if someone at your address, or with a very similar name, has been irresponsible with his or her credit. Resolving problems in the spring will help the fall disbursements to arrive on time!
Students with poor credit may be able to obtain loans with co-signers or loan sponsors (parents or others with good credit who agree to borrow on a student’s behalf (sponsored loans). If you believe credit will be an issue for you, you are encouraged to contact us as early as possible to discuss your particular situation.
Deferment Forms for Borrowers of Undergraduate Loans
One of the most common causes of bad credit for law students is the failure to file deferment forms for undergraduate loans. Students who have borrowed federal or private education loans as undergraduates, or while enrolled in a prior graduate program, should contact their lenders to inform them that they are returning to school. Graduate students are eligible for in-school deferments if they are enrolled at least half-time at the Law School.
Do not assume that because you are a student you can stop making payments on your prior education loans. This will result in a delinquent account on your credit report. You must file the necessary forms and continue making payments until you receive approval of the deferment from your lender.
Maintaining Good Credit
So, maintain good credit and protect your good credit, now and forever.
- Pay your bills on time. To help, set up a simple record-keeping system (Quicken, file folders, notebook, calendar) so you will know how much you owe and when the payments are due.
- If you have trouble paying any bills in full, talk to the company/ies about arranging for partial payments over a longer period of time. Don’t just ignore the bills.
- Don’t obtain too many credit cards – the temptation to use them all may be great and your ability to make full payment each month while in law school is probably very low.
- Request that free credit report regularly. If you see incorrect information, correct that information immediately by writing to the company that reported the information and by writing to the credit reporting agency. Log onto www.ftc.gov/credit for more information on correcting mistakes in your credit report.