Credit Score and Medical Student Loans: What Premeds Should Know

It’s never too early to be on a solid financial footing, and adopting smart borrowing behaviors can be especially important for students as they enter medical school and start taking on debt that will take many years to settle. be reimbursed. A veteran of the student loans industry offers advice to get you on a favorable credit course, even if you’ve already made a few mistakes.

To get started, it’s essential to understand what a credit score is: a numerical calculation of the likelihood that you will pay off your debt. It takes into account several factors, including whether you make your credit card and loan payments on time, how much you owe and how many lines of credit you have open, as well as your credit mix – the different types of credit you have. use.

Most lenders use the FICO credit score, which ranges from a low of 300 to a high of 850. In general, a score of 700 or better is considered good; 750 or better is excellent.

It’s also important to note that federal agencies, for the most part, do not take credit scores into account when assessing eligibility for student loans. But private lenders certainly do, and if you ever want to reap the benefits of private student loans – including, potentially, lower interest rates and greater repayment flexibility – as well as competitive rates on loans automobiles and mortgages, you will need to have good credit. Even some employers check credit scores.

Related Coverage

3 Reasons Why Student Loan Debt Shouldn’t Discourage You From Going To Medical School

Alex Macielak, who manages business development and partnerships for Laurel Road, WADA’s Preferred Provider for Student Loan Refinancing, presents several ways to make sure you’re working to get a good score, even if you have little money. time to spend on your finances. .

Get a copy of your credit report. “The first step to optimizing your credit is knowing your credit score,” he said. “You can check your score for free once a year at freecreditreport.com, which will also tell you the contributing factors. From there, you should get some feedback on what you could do to improve your score.

Stay well under your borrowing limits. “Everyone knows that the most important thing is to make your payments on time, but a lot of people don’t know that the credit bureaus want to see a usage level of 30% or less, even if you pay your card every month, ”Macielak explained. “A very simple step you can take if you go over that amount is to ask your credit card company to extend your line of credit so that you then use 30% or less each month. Credit card companies are usually more than happy to do this.

Keep your old credit card. “The longer your accounts are open, the more favorably they will reflect on your credit report,” Macielak said. “So if you have a credit card that you had some time ago – and maybe you just don’t use it anymore because it doesn’t have great benefits or good terms – if it doesn’t. has no associated fees, it’s still to your advantage to keep it open. Maybe put one thing a year.

Related Coverage

Financing a medical student loan: what you need to know before signing

Save money. “If you ever find yourself in an unforeseen financial situation, having savings will allow you to keep paying off your loan and not fall into default or default, which would lower your credit score,” he said.

Think long term. “Every credit event, even bankruptcy, ends up dropping your history,” Macielak noted. “So even if you haven’t got the best start, there is still room to improve your score. Nothing is forever.”

Learn more from WADA on medical student loan management.

The benefits of individual WADA members, including those of Laurel Road, can help you find savings to help you organize your personal finances and manage your debt.

About Terry Simmons

Check Also

Whitmer veto bills to add multi-state licensure for nurses and psychologists

Gov. Gretchen Whitmer has vetoed two bills that would have allowed Michigan to join other …