Back to school season is officially here! The air is getting crisp, PSLs are in full swing, and it’s nearly impossible to find a notebook at Target. It’s such a nostalgic time of year. Remember those days? Sitting in class, diligently taking notes (or passing them to your friends!), and cramming for exams.
Alongside math, social studies, and language arts, I really wish one more course had been added to the syllabus—financial literacy.
I don’t know about you, but I’m definitely not being asked to quote Shakespeare nearly as often as I’m asked what a credit score really means, how to get out of debt, or how to make smart money moves to live a life of freedom!
While these conversations are happening more often now, I still wish they were part of the classroom experience. It would have saved me so much time, stress, and hard-earned lessons.
But, you don’t know what you don’t know! That’s exactly why I wanted to share this article with you: a crash course in credit to set you up for success!
The Real Grade Lenders Look At: Why Your FICO Score Matters
You might hear about many different credit scores, but here’s a key fact: about 90% of lenders use the FICO score to make decisions. Think of it as your financial GPA, it follows you when applying for loans, credit cards, or even apartments.
FICO scores range from 300 to 850 and are calculated based on:
- Payment history
- Amounts owed
- Length of credit history
- New credit
- Credit mix
The higher your score, the better your chances of approval and the lower your interest rates.
Success Secret: When you check your credit score, ask which type it is. Knowing your FICO score helps you focus on improving the grade that really counts in the eye of lenders!
Co-Signing: More Than Just a Favor…
Many people think of co-signing as a kind favor to help out a friend or family member. While that’s true, here’s something else to consider: co-signing is a joint account, not just a loan favor.
When you co-sign, you’re agreeing to repay the debt if the borrower doesn’t. This means if the primary borrower misses payments, your credit takes the hit, and you’re legally responsible.
That’s why co-signing can be risky. Just like group projects. Remember those? If someone didn’t show up for their part, it fell heavily on everyone else. Same applies here.
If you’re asked to co-sign, consider if you’re willing (and able) to take on this responsibility. And if you’re asking someone to co-sign, be upfront. Communicate your repayment plan and build trust from day one.
Pop Quiz!: What’s the Difference Between Revolving Debt vs. Installment Loans?
Credit comes in two main forms:
- Revolving debt is like a credit card: you have a credit limit and you can borrow and repay repeatedly. Your balance can go up and down month to month. Keeping your balance low compared to your limit helps your credit score.
- Installment loans are things like student loans, car loans, or mortgages where you borrow a fixed amount and pay it back in regular installments. These show lenders you can handle long-term debt responsibly.
Knowing the difference helps you manage your debt wisely and build a strong credit profile.
Evaluate Your Financial Report Card
Just like you’d check your grades to know how you’re doing in school, you should regularly check your credit report to see how you’re doing with your financial goals.
The best part? I made it easy for you to do so! You can click here to get your free credit snapshot today (bonus: it won’t hurt your score!).
If you find mistakes, dispute them right away! Don’t wait. Just like you’d go to your teacher if there was a D where there should be a B, right? Keeping your report accurate can boost your score and prevent surprises when you apply for credit.
Final Thoughts: Take Control of Your Financial Future
How was that for a Credit 101 crash course??
Understanding your FICO score, the reality of co-signing, the difference between debt types, and checking your credit report regularly are lessons everyone should know, so you don’t have to learn them the hard way. (Like not being able to buy a home…or having your electricity shut off. Maybe I know that one from experience!)
Think of this as the course you never took, but use every day. And the good news? It’s never too late to start learning and improving your credit.
Want personalized help? As your go-to credit coach, I’m here to guide you step-by-step to better credit health and financial confidence!
- Follow me on Instagram: @creditjeanne
- Listen to the podcast: Credit Over Coffee
- Check out more resources: jeannekelly.net
- Download the app! : https://www.creditbosslady.com/
