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On-Time Student Loans = Good Credit

Paying your student loans on time is one way to help you maintain a positive credit rating. A credit report is a record of your credit activities. It lists any credit-card accounts or loans you may have, the balances, and how regularly you make your payments. It also shows if any action has been taken against you because of unpaid bills.

What if I don't pay my student loan on time?
If you stop making payments on your student loans for an extended period of time (270 days or more), your loans will be in default. The consequences of defaulting on your loan are serious, including:

• Your default will be reported to the credit agencies and a collection agency may be hired by your lender to collect payment
• Your wages may be garnished and your federal and state tax refund may be taken to pay off the loan
• You may not be able to renew a professional license you hold
• You could be sued for the amount of the loan and be liable for court costs and attorney fees.
• You will be ineligible for future federal aid if you decide to go back to school

If you have trouble making payments on your loan, it's best to work with your lender before you go into default. You may be eligible for deferment or forbearance, or your lender may offer income-sensitive repayment options. Consolidation is another option to help lower your loan payments.

Why is my credit report so important?
Credit reports don't just factor in when you're applying for a new auto or home loan. Your credit report can impact your ability to do the following:

• Get a job - more and more potential employers are viewing credit reports on new hires. A negative report may hurt you in your job search.
• Rent an apartment - you may lose out on the apartment of your choice or may be asked to pay a larger deposit or get a co-signer if you have bad credit.
• Insurance - many insurance companies (especially auto insurance), base their rates on credit scores. Having bad credit could force you to pay more.

Viewing Your Credit Report
You can order and review your personal credit report. Credit reports will include information on your credit cards and consumer accounts, even inactive ones. Any federal student loan information will also be contained in the report.

A new government law allows you to get 1 free copy of your credit report from all three major credit bureaus (Experian, Equifax and TransUnion) every year. To request your credit report, go to www.annualcreditreport.com

To find out more information about how to build and maintain positive credit and tips for responsible financing, continue on to our Financial Resources section.