Don’t be afraid of credit
Credit can play a big part in anyone’s life, especially when applying for student loan refinancing. No one is born with good credit – responsible repayment of debt and on-time bill payment build your credit over time. The best thing you can do if you don’t have a line of credit is to open one and begin using it responsibly. Building credit will assure lenders that you will repay debts, opening the door for potentially life-changing loans.
If you currently don’t have an open line of credit, we can help you. Two good ways to establish a line of credit are secured credit cards (requires a deposit) and credit-builder loans (a loan given to a savings account which cannot be accessed until it has been repaid). Both are relatively risk-free ways for lenders to help you to set up a line of credit or boost your existing credit. Once you have boosted your credit, you may be eligible for student loan refinancing to save you money. If you have money in the bank but no credit, you can opt for a share or certificate-backed loan, wherein a deposit at your financial institution is held as collateral until the loan is repaid. These methods can help build credit without exceeding your means.
Once you’ve established a line of credit, it’s important to keep your balances low. Ideally you should use under 30% of your available credit each month. If a large purchase requires more than 30%, try to pay it off incrementally as soon as you can start making payments. If you have small balances on multiple cards, pay them off! This will make student loan refinancing easier.
As you look for student loan refinancing, avoid anything that hints at risk, i.e. paying less or charging more than you usually do. Also, charging any fees related to financial tumult ahead, such as a divorce lawyer is a red flag to a lender.
Lenders are attracted to people who take care of their credit. Some people try to get large purchases removed immediately after they’ve been paid off – this is a mistake! Don’t remove old debt records from your credit report. Lenders will appreciate the fact that you’ve paid your debt.
Every year you are entitled to one free credit report from each of the three credit reporting agencies: Equifax, Experian, and TransUnion. Ordering one every four months can give you a better picture of your true credit score throughout the year. The most important part of your credit report is the identifying information. As you are establishing a line of credit, make sure you are the person using it! Remember to comb your report for accuracy, because identity theft can do significant damage to your score.