Students lack adequate credit score knowledge

Robin Heim

According to financial guru Suze Orman, the single biggest thing to impact your financial future is your FICO score.

Unfortunately, many people-college students especially-are ignorant about what the score is, how it is calculated and why it is so important.

FICO, short for the credit score system developed by Fair Isaac Corporation, is the most widely used credit risk score model in the financial industry. It is a three digit number ranging from 300 to 850 that determines the interest rate you will pay on your car loan, home mortgage and credit cards.

A score that is too low can even prevent you from renting an apartment or getting a good job. In reality, a FICO score tells financial lenders how high of a risk you are, a.k.a. whether or not you’re likely to pay back the money you’ve borrowed.

Though the exact formula that determines the score is considered a trade secret, the categories that make up the score are not. Having a record of paying bills on time accounts for 35 percent of the score. The total balance on your credit cards and other loans compared to your total credit limit makes up 30 percent, while the length of your credit history makes up 15 percent. Furthermore, the number of new accounts and recent applications for credit make up 10 percent and the remaining 10 percent is comprised of a mix of credit cards and loans.

What’s a good score? Experts say that almost no business will consider someone with a score below 500. A score between 500 and 599 is considered the worst category in which to fall while having a score between 720 and 850 means that you’re financially “healthy.”

How lenders deal with those who fall in between those two ranges is subjective. In any case, the higher the score, the better off you are financially. This means that you will get prime rates on credit card interest, as well as the lowest interest rates for car loans and home loans in the future.

An initially low score is not the end of the world. It can be fixed by consolidating and paying off debt and raising the maximum credit on existing cards among other things.

Of course, in order to have a credit score you must have credit history. This means owning a credit card (which almost all Villanovans already do). It is of the utmost importance to pay the bill on time and if possible, pay the amount in full each billing period. Otherwise, you may find yourself paying high interest rates now and in the future.

In order to check your FICO score, access your credit reports online from Equifax, Experian and TransUnion by logging on to

As of 2005, every consumer will be allowed one free report from each company per year. It is important to note that while the reports are free, the actual FICO score is not and will set you back $14.95. But if you’re looking to make any business transaction that will cost you interest, the $14.95 is well worth the thousands (yes, thousands) you could save by having the highest score possible and getting the lowest interest rates. Knowledge is power and in this case, it’s money too.