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3 Things Nobody Tells You About Your Credit Score (But Should)

By U.S. News & World Report

It’s expensive to have a crummy credit score.

The truth is that folks who either have poor credit or little credit get the worst of everything when it comes to credit cards: higher interest rates, more fees, smaller sign-up bonus, fewer special perks. It can end up costing you thousands of dollars during your lifetime just in higher interest rates on mortgages, credit cards and car loans.

Most people understand the consequences of crummy credit, at least to some degree. What’s far less clear is exactly what a credit score is all about and just how people can change their crummy credit for the better.

Here a few things about credit that you might not know.

[See: 12 Habits to Help You Take Control of Your Credit.]

It’s not as complicated as you might think. People tend to think of credit as this mysterious, complex beast that is impossible to understand. That’s not entirely incorrect. There are plenty of nuances and subtleties to the credit-scoring formula that can be super confusing. However, at a basic level, credit scores are far less complicated than people might believe.

We overthink credit to a big degree. Credit is really about three things:

— Paying your bills on time every single month.

— Keeping your balances as low as possible.

— Not applying for too much credit too often.

Do those three things over and over — lather, rinse, repeat — and your credit is going to be just fine. Obviously, those things can be easier said than done, especially keeping balances low, but if you can manage it, you’ll be on your way to a lifetime of good credit.

[See: 12 Simple Ways to Raise Your Credit Score.]

It doesn’t always matter. Your credit score is very important, except when it isn’t. If you’re planning to apply for a mortgage, car loan or credit card sometime soon, you definitely need to be mindful of your score. That’s especially true if your score is teetering on the edge between good and great or good and not-so-good. In that case, you either need to make moves to better your score, or at least avoid doing anything that can harm your score.

Most of the time, however, there’s no need to obsess over your credit score. If you’re not applying for a loan, looking for car insurance or trying to rent a new apartment in the near future, you probably don’t have to think too much about your credit score. Simply keep paying your bills on time and minimizing your balances. Then, when the time comes again that you need a good credit score, it’ll be there waiting for you.

The higher the score, the harder it can fall. So, you finally got the credit score of your dreams. You worked so hard for it, paying down those big balances and getting every payment in on time, and now it is time to relax and enjoy the fruits of your labor. After all, what took so long to build will take just as much time to tear down in case things go badly, right?

Wrong. You could be one late payment away from kissing that awesome credit score goodbye.

FICO and VantageScore, the two leaders in credit scoring, typically don’t give too many specifics about just how much a credit mistake can damage your credit score. (There are too many other variables, they say. Every individual case is different.) However, they have indicated that someone with a great score might take a bigger credit hit from a mistake than would someone with less-than-perfect credit.

[See: What to Do If You’ve Fallen (Way) Behind on Your Credit Card Payments.]

In one example, FICO indicates that a person with a 780 credit score could see his score fall more than 100 points as the result of one single 30-day late payment. A foreclosure could drop the person’s score by 150 points.

By contrast, someone with a 680 credit score would see a 60- to 80-point drop after a late payment and around a 100-point drop after a foreclosure. Those decreases are big and would be potentially devastating to someone with already imperfect credit, but they would be smaller than the drops seen by the cardholder with a 780 score.

Whatever your score, the bottom line is that mistakes can kill your credit. The good news, however, is that many of those mistakes are avoidable. For example, you can make late payments a thing of the past by setting up autopay with your bank. Just be sure that you set the amount to pay more than the minimum each month. Otherwise, your debt can grow faster than you’d imagine.

More from U.S. News

10 Completely Careless Credit Card Mistakes You’re Making

8 Ways to Maximize Your Credit Card Rewards

Basic Money Lessons You (Probably) Missed in High School

3 Things Nobody Tells You About Your Credit Score (But Should) originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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