Introduction

I decided to take a look at my credit recently, since I’ll be graduating soon. I’ll need to get credit to rent an apartment, get loans, and so on. Here’s what I came up with:

Credit Reports

Everyone gets to take a look at their credit reports, provided by the three main credit companies – Experian, Equifax, and Transunion. The reports are free, and can be accessed through the site http://annualcreditreport.com. This is a legitimate site, as mentioned on the FTC’s official website: http://www.ftc.gov/freereports The credit report lists your history of credit, including information about payments, balances, loans, and credit checks. It’s very useful to take a look at. For me, I was happy to find that I had never been late on a payment, but I was surprised at how many credit cards I’d opened over time.

Credit Score

Your credit score is what lenders look at when determining your eligibility. This is NOT free for you to look at. I made the novice mistake of requesting my VantageScore, which is an alternative to the FICO score. The VantageScore is cheaper to order (~$9 from Transunion), but it is on a different scale and scoring system than the FICO score, which is most used. You can go to http://myfico.com to buy your FICO score ($16 per report per credit company).

My VantageScore was 810 (on a 501-990 scale), at the 54th percentile. Transunion ranked this a “B”, and cited my weaknesses as not having enough diversity of credit and not enough length of credit history. Once I take loans on real estate and get a little older, this will be no problem.

I didn’t bother ordering a FICO score because myfico.com was having some technical problems. It’s not legit to do a straight arithmetic conversion because of different distribution and calculation methods. For example, my FICO score directly converted would be around 680; however, at the 54th percentile, it would actually be around 730-740.

Here is a graph of what goes into your FICO score. As would be expected from a college student, I am weak in “Types of Credit Used” (all I have are credit cards and student loans) and “Length of Credit History” (only 3 years worth). My credit limits have been increasing, but I’m not sure if that’s good enough for high scores in the “New Credit” category. What I’m perfect in is “Payment History” and “Amount Owed.”

Credit Cards

I realized that I have a lot of credit cards, so I wanted to close some. Usually, it’s not recommended to close credit cards without annual fees, even if you don’t use them. The reasons are that you will lose that credit history from your credit report (in 10 years or so), and reduce the amount of your total credit. Luckily, this wasn’t a problem for me. I found that I had three credit cards from Citibank, one of which I had been infrequently using and two that I rarely used. I asked the representative to consolidate the credit limits for the three cards into one of the cards and close the other two. This way, I maintained my total credit line.

I also found that I had two Chase Amazon.com cards. Again, I was able to consolidate the credit limits, close one card, get a free extra bonus points, and upgrade my rewards program.

The only bank that I was not as pleased with was Bank of America. They quickly closed my account without questions, but made no effort to keep my account open. They refused to give any increased rewards programs, a factor that makes me reconsider my preferred use of their card. In comparison, for one of my cards, Citibank offered a 1% cash returns increase to my existing cash returns. For another, they offered 3000 extra reward points for $300 of spending. I would normally spend this amount anyways, so I would get 3300 points on $300, which comes out to about 11% rewards. Not to turn this into a rant against Bank of America, but I’ve found their customer service to be weak.

Conclusion

There’s a lot to learn about your credit! For fellow graduates, now is as good a time as ever. At the least, you’ll avoid wasting $9 like I did on a score that few creditors use; at best, you may save yourself a lot of headache later on in life. Good luck, and as usual, send me your questions and comments.