{"id":2172,"date":"2016-09-23T17:10:55","date_gmt":"2016-09-23T17:10:55","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/waymaker-collegesuccess\/?post_type=chapter&#038;p=2172"},"modified":"2020-08-14T16:22:00","modified_gmt":"2020-08-14T16:22:00","slug":"text-using-credit-responsibly","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/waymaker-collegesuccess\/chapter\/text-using-credit-responsibly\/","title":{"raw":"Using Credit Responsibly","rendered":"Using Credit Responsibly"},"content":{"raw":"<div class=\"textbox learning-objectives\">\r\n<h3>Learning Objectives<\/h3>\r\n<ul>\r\n \t<li style=\"font-weight: 400;\">Define credit history and identify resources for assistance with credit issues<\/li>\r\n<\/ul>\r\n<\/div>\r\n<h2>Credit History and Credit Reports<\/h2>\r\nYou begin to establish a credit history as soon as you get your first credit card or get a loan.\u00a0Your credit history includes information about the number of\u00a0credit cards and loans you have and how conscientious\u00a0you are about paying your bills. Three companies, TransUnion, Equifax, and Experian, collect this information and use it to create\u00a0a credit report, which functions\u00a0as a summary of your credit history. By law, you\u2019re entitled to one free credit report each year from <a href=\"https:\/\/www.annualcreditreport.com\/index.action\" target=\"_blank\" rel=\"noopener\">Annual Credit Report<\/a>. Although you have to pay extra for your credit score to be included with your credit report, a lot of people use this as a quick reference to gauge how good or bad someone\u2019s credit is. Different companies use slightly different ratings, but 300 or so is considered to be a low credit score,\u00a0and\u00a0700\u2013850 is considered to be high.\r\n\r\nIt's a good idea to sign up for a\u00a0free credit report\u00a0from the <a href=\"https:\/\/www.annualcreditreport.com\/index.action\" target=\"_blank\" rel=\"noopener\">Annual Credit Report<\/a>, since other companies will charge to give you\u00a0your credit history and score. The best thing is to keep track of your bills and pay them in a timely manner so you don\u2019t have to worry about whether your credit is good or not. Potential landlords, banks, loan companies, car dealers, and even employers will often ask for your name and social security number so that they can obtain your credit information. Every business is different, but many use credit scores to evaluate prospective\u00a0customers and decide\u00a0how responsible or risky they might be.\r\n\r\nThe following video shows how\u00a0your credit score is determined and some rules of the road for improving your current credit rating.\r\n\r\n<iframe src=\"\/\/plugin.3playmedia.com\/show?mf=1291329&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=375&amp;video_id=EV-fF_tQDXg&amp;video_target=tpm-plugin-amw8i6wj-EV-fF_tQDXg\" width=\"800px\" height=\"450px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\"><\/iframe>\r\n\r\nYou can view the <a href=\"https:\/\/course-building.s3-us-west-2.amazonaws.com\/College+Success\/Transcripts\/HowToBuildAGoodCreditScore_transcript.txt\" target=\"_blank\" rel=\"noopener\">transcript for \"How to Build a Good Credit Score\" here (opens in new window)<\/a>.\r\n<h2>Resources for Credit Issues<\/h2>\r\n&nbsp;\r\n\r\n[caption id=\"attachment_274\" align=\"alignright\" width=\"349\"]<img class=\"wp-image-274\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/1110\/2016\/02\/02025004\/3238419417_e2b3a0e050_z.jpg\" alt=\"a woman lecturing to a group of adults\" width=\"349\" height=\"262\" \/> Credit counselors might be able to recommend budgeting and credit courses that will give you tips for managing your personal finances[\/caption]\r\n\r\nMaintaining credit is a big responsibility, and sometimes it can be challenging. For example, you might\u00a0have to borrow more student loans than you want\u00a0because you don't\u00a0have time to work while attending school, or it might be difficult to find a decent-paying job as a student or recent graduate. These are just a\u00a0couple\u00a0of issues that could\u00a0threaten your credit. Repairing bad credit can take a long time\u2014up to seven years\u2014so it's important to take action as soon as you're having trouble paying bills or overspending. Different resources and options are available to help you deal with credit issues, including the following:\r\n<ul>\r\n \t<li><strong>Loan consolidation<\/strong>: Students may\u00a0consider having multiple loans consolidated with the federal government so they have to make only one loan payment per month. While this may\u00a0give you\u00a0more time pay off\u00a0student loan debt, it may\u00a0not be the best option, since the one monthly payment can cost more and accrue a higher interest rate. Students should talk to loan company representatives and financial aid resources at their institution to discuss other payment options, such as\u00a0income-based payments in which the amount you pay each month is based on your income level.<\/li>\r\n \t<li><strong>Credit counselors<\/strong>: Credit counselors are trained to help people develop personal budgets and to provide classes on savings and debt solutions. They may\u00a0also offer debt management plans in which they\u00a0work with\u00a0your credit card and loan companies to arrange a deal and ask you for monthly deposits so that they can help you pay off your debts. If you are interested in a consultation from a credit counselor, you should ask family, friends, or your local government for references for reputable ones. You will also want to find counselors that do not charge customers too much for their services to avoid additional\u00a0debt.<\/li>\r\n \t<li><strong>Debt settlement plans<\/strong>: Debt collection companies will offer services to their clients that involve talking to credit card and loan companies and coming up with a plan to pay a lump sum instead of the total debt owed. Similar to finding credit counselors, you should contact local government offices to find reputable debt collection companies so you can avoid overpayments and scams.<\/li>\r\n \t<li><strong>Bankruptcy<\/strong>: Bankruptcy is an official status that is obtained\u00a0through\u00a0court procedures, and it means that means you\u00a0are unable to pay off your\u00a0debts. People may\u00a0file for Chapter 13 bankruptcy, which means they don't lose any assets and have a payment plan of three\u2013five years to pay off\u00a0their debts, or Chapter 7 bankruptcy, which means they may\u00a0have to surrender assets that can be used to pay off their debts. Bankruptcy damages\u00a0your credit score, and the fees for filing paperwork and hiring an attorney can be costly, so it is important to consider other financial solutions first.<\/li>\r\n<\/ul>\r\n<h2>Contribute!<\/h2><div style=\"margin-bottom: 8px;\">Did you have an idea for improving this content? We\u2019d love your input.<\/div><a href=\"https:\/\/docs.google.com\/document\/d\/1bVlfFmZ7q6t5O7ll2ZT4xL115LddiVFV1ulMYPlOuco\" target=\"_blank\" style=\"font-size: 10pt; font-weight: 600; color: #077fab; text-decoration: none; border: 2px solid #077fab; border-radius: 7px; padding: 5px 25px; text-align: center; cursor: pointer; line-height: 1.5em;\">Improve this page<\/a><a style=\"margin-left: 16px;\" target=\"_blank\" href=\"https:\/\/docs.google.com\/document\/d\/1vy-T6DtTF-BbMfpVEI7VP_R7w2A4anzYZLXR8Pk4Fu4\">Learn More<\/a>","rendered":"<div class=\"textbox learning-objectives\">\n<h3>Learning Objectives<\/h3>\n<ul>\n<li style=\"font-weight: 400;\">Define credit history and identify resources for assistance with credit issues<\/li>\n<\/ul>\n<\/div>\n<h2>Credit History and Credit Reports<\/h2>\n<p>You begin to establish a credit history as soon as you get your first credit card or get a loan.\u00a0Your credit history includes information about the number of\u00a0credit cards and loans you have and how conscientious\u00a0you are about paying your bills. Three companies, TransUnion, Equifax, and Experian, collect this information and use it to create\u00a0a credit report, which functions\u00a0as a summary of your credit history. By law, you\u2019re entitled to one free credit report each year from <a href=\"https:\/\/www.annualcreditreport.com\/index.action\" target=\"_blank\" rel=\"noopener\">Annual Credit Report<\/a>. Although you have to pay extra for your credit score to be included with your credit report, a lot of people use this as a quick reference to gauge how good or bad someone\u2019s credit is. Different companies use slightly different ratings, but 300 or so is considered to be a low credit score,\u00a0and\u00a0700\u2013850 is considered to be high.<\/p>\n<p>It&#8217;s a good idea to sign up for a\u00a0free credit report\u00a0from the <a href=\"https:\/\/www.annualcreditreport.com\/index.action\" target=\"_blank\" rel=\"noopener\">Annual Credit Report<\/a>, since other companies will charge to give you\u00a0your credit history and score. The best thing is to keep track of your bills and pay them in a timely manner so you don\u2019t have to worry about whether your credit is good or not. Potential landlords, banks, loan companies, car dealers, and even employers will often ask for your name and social security number so that they can obtain your credit information. Every business is different, but many use credit scores to evaluate prospective\u00a0customers and decide\u00a0how responsible or risky they might be.<\/p>\n<p>The following video shows how\u00a0your credit score is determined and some rules of the road for improving your current credit rating.<\/p>\n<p><iframe loading=\"lazy\" src=\"\/\/plugin.3playmedia.com\/show?mf=1291329&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=375&amp;video_id=EV-fF_tQDXg&amp;video_target=tpm-plugin-amw8i6wj-EV-fF_tQDXg\" width=\"800px\" height=\"450px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\"><\/iframe><\/p>\n<p>You can view the <a href=\"https:\/\/course-building.s3-us-west-2.amazonaws.com\/College+Success\/Transcripts\/HowToBuildAGoodCreditScore_transcript.txt\" target=\"_blank\" rel=\"noopener\">transcript for &#8220;How to Build a Good Credit Score&#8221; here (opens in new window)<\/a>.<\/p>\n<h2>Resources for Credit Issues<\/h2>\n<p>&nbsp;<\/p>\n<div id=\"attachment_274\" style=\"width: 359px\" class=\"wp-caption alignright\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-274\" class=\"wp-image-274\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/1110\/2016\/02\/02025004\/3238419417_e2b3a0e050_z.jpg\" alt=\"a woman lecturing to a group of adults\" width=\"349\" height=\"262\" \/><\/p>\n<p id=\"caption-attachment-274\" class=\"wp-caption-text\">Credit counselors might be able to recommend budgeting and credit courses that will give you tips for managing your personal finances<\/p>\n<\/div>\n<p>Maintaining credit is a big responsibility, and sometimes it can be challenging. For example, you might\u00a0have to borrow more student loans than you want\u00a0because you don&#8217;t\u00a0have time to work while attending school, or it might be difficult to find a decent-paying job as a student or recent graduate. These are just a\u00a0couple\u00a0of issues that could\u00a0threaten your credit. Repairing bad credit can take a long time\u2014up to seven years\u2014so it&#8217;s important to take action as soon as you&#8217;re having trouble paying bills or overspending. Different resources and options are available to help you deal with credit issues, including the following:<\/p>\n<ul>\n<li><strong>Loan consolidation<\/strong>: Students may\u00a0consider having multiple loans consolidated with the federal government so they have to make only one loan payment per month. While this may\u00a0give you\u00a0more time pay off\u00a0student loan debt, it may\u00a0not be the best option, since the one monthly payment can cost more and accrue a higher interest rate. Students should talk to loan company representatives and financial aid resources at their institution to discuss other payment options, such as\u00a0income-based payments in which the amount you pay each month is based on your income level.<\/li>\n<li><strong>Credit counselors<\/strong>: Credit counselors are trained to help people develop personal budgets and to provide classes on savings and debt solutions. They may\u00a0also offer debt management plans in which they\u00a0work with\u00a0your credit card and loan companies to arrange a deal and ask you for monthly deposits so that they can help you pay off your debts. If you are interested in a consultation from a credit counselor, you should ask family, friends, or your local government for references for reputable ones. You will also want to find counselors that do not charge customers too much for their services to avoid additional\u00a0debt.<\/li>\n<li><strong>Debt settlement plans<\/strong>: Debt collection companies will offer services to their clients that involve talking to credit card and loan companies and coming up with a plan to pay a lump sum instead of the total debt owed. Similar to finding credit counselors, you should contact local government offices to find reputable debt collection companies so you can avoid overpayments and scams.<\/li>\n<li><strong>Bankruptcy<\/strong>: Bankruptcy is an official status that is obtained\u00a0through\u00a0court procedures, and it means that means you\u00a0are unable to pay off your\u00a0debts. People may\u00a0file for Chapter 13 bankruptcy, which means they don&#8217;t lose any assets and have a payment plan of three\u2013five years to pay off\u00a0their debts, or Chapter 7 bankruptcy, which means they may\u00a0have to surrender assets that can be used to pay off their debts. Bankruptcy damages\u00a0your credit score, and the fees for filing paperwork and hiring an attorney can be costly, so it is important to consider other financial solutions first.<\/li>\n<\/ul>\n<h2>Contribute!<\/h2>\n<div style=\"margin-bottom: 8px;\">Did you have an idea for improving this content? We\u2019d love your input.<\/div>\n<p><a href=\"https:\/\/docs.google.com\/document\/d\/1bVlfFmZ7q6t5O7ll2ZT4xL115LddiVFV1ulMYPlOuco\" target=\"_blank\" style=\"font-size: 10pt; font-weight: 600; color: #077fab; text-decoration: none; border: 2px solid #077fab; border-radius: 7px; padding: 5px 25px; text-align: center; cursor: pointer; line-height: 1.5em;\">Improve this page<\/a><a style=\"margin-left: 16px;\" target=\"_blank\" href=\"https:\/\/docs.google.com\/document\/d\/1vy-T6DtTF-BbMfpVEI7VP_R7w2A4anzYZLXR8Pk4Fu4\">Learn More<\/a><\/p>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-2172\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>College Success. <strong>Authored by<\/strong>: Jolene Carr. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Shared previously<\/div><ul class=\"citation-list\"><li>Image of credit counseling session. <strong>Authored by<\/strong>: Phil Sexton. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/flic.kr\/p\/5WaKgx\">https:\/\/flic.kr\/p\/5WaKgx<\/a>. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><div class=\"license-attribution-dropdown-subheading\">All rights reserved content<\/div><ul class=\"citation-list\"><li>How to Build a Good Credit Score. <strong>Authored by<\/strong>: Young Indiana. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/youtu.be\/EV-fF_tQDXg\">https:\/\/youtu.be\/EV-fF_tQDXg<\/a>. <strong>License<\/strong>: <em>All Rights Reserved<\/em>. <strong>License Terms<\/strong>: Standard YouTube License<\/li><\/ul><div class=\"license-attribution-dropdown-subheading\">Public domain content<\/div><ul class=\"citation-list\"><li>Your Credit History. <strong>Provided by<\/strong>: Federal Trade Commission. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/www.consumer.gov\/articles\/1009-your-credit-history#!what-to-know\">https:\/\/www.consumer.gov\/articles\/1009-your-credit-history#!what-to-know<\/a>. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/about\/pdm\">Public Domain: No Known Copyright<\/a><\/em><\/li><li>Consolidating Student Loans. <strong>Provided by<\/strong>: US Department of Education. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/studentaid.ed.gov\/sa\/repay-loans\/consolidation\">https:\/\/studentaid.ed.gov\/sa\/repay-loans\/consolidation<\/a>. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/about\/pdm\">Public Domain: No Known Copyright<\/a><\/em><\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":19,"menu_order":18,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"College Success\",\"author\":\"Jolene Carr\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"},{\"type\":\"pd\",\"description\":\"Your Credit History\",\"author\":\"\",\"organization\":\"Federal Trade Commission\",\"url\":\"https:\/\/www.consumer.gov\/articles\/1009-your-credit-history#!what-to-know\",\"project\":\"\",\"license\":\"pd\",\"license_terms\":\"\"},{\"type\":\"copyrighted_video\",\"description\":\"How to Build 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