I am an official brand ambassador for FICO. While I receive compensation for my participation as a brand ambassador, opinions are mine.

In the midst of the current pandemic and so many things in our lives changing quickly, one of the things that many people are thinking about is protecting their financial future, including maintaining good credit health.

Trust me your FICO^® Score is VERY IMPORTANT.  Our credit scores can affect many areas of our lives from how much you are charged to buy a car, a house, possibly rent an apartment, and more!

When I was finishing my last semester in college, I began the search to buy my first home. This immediately showed me the importance of my credit health and credit score. Before I could begin my search, I had to get pre-approved for my loan to determine how much house or loan size I could afford. Thankfully, I had been a good steward of my credit as that was the first hurdle I had to jump to begin the home buying process. But then when the lender looked at my credit report and FICO^® Score, they also noticed I had some credit card debt.  This was another step toward my goal and I had to pay off the credit card before my loan was finalized!  Without focusing on strengthening my credit health and FICO^® Score, I would not have been able to get approved and finalize my home purchase.

Now, let’s talk a little bit about the credit score basics that really matter.

Your FICO^® Score, generally ranges from 300 to 850. FICO is also a completely separate analytics company, independent of the major credit bureaus.  FICO provides the algorithm to Experian, Equifax, and Transunion.  Each bureau creates a FICO Score based on the data that each credit bureau has compiled.  This can be a bit confusing, which is why it is important to review your credit report data across all three, know your FICO Score at each bureau and confirm when talking to your lender that it is the FICO Score they are using.   

This is really important.  The score that really matters is the FICO^® Score— the FICO^® Score is used in over 90% of U.S. lending decisions. Yes, 90%! So when applying for a loan or any other credit your FICO Score is the number they are looking at!

I told you it was important!

Time to Demystify Your FICO Score

Now that you know why it is so important, here are a few things to keep in mind as you work on understanding your score and managing your credit:

Checking your score DOES NOT lower your FICO^® Score.

It’s YOUR score, you can look at it as much as you want and it will not negatively impact your score. 

Knowing the five credit scoring factors is vital.

If you have a clear understanding of the factors that impact your score, it will be easier to look for ways to increase it. This is what your FICO^® Score is made up of:

1. Payment history (35% of your scores):
   Whether you’ve paid past credit accounts on time
2. Amounts owed (30% of your scores):
   The amount of credit and loans you are using
3. Length of credit history (15% of your scores):
   How long you’ve had credit
4. New credit (10% of your scores):
   Frequency of credit inquires and new account openings
5. Credit mix (10% of your scores):
   The mix of your credit, retail accounts, installment loans, finance company accounts, and mortgage loans

Things that ARE NOT included in your FICO^® Score.

Now that we know exactly what is used to determine your score, lets quickly review what is not a part of your FICO Score. Ensuring that your score is an accurate representation of your credit profile is very important to FICO.  Because of this, your score only considers information in your credit report and does not know where you live, how much you make, if you have a job or not, your profession, ethnicity or name.

“The FICO® Score doesn’t know your age, ethnicity, gender, name, race, religion or ZIP code.” – fico.com

Know where to get your FICO Score.

It’s hard to understand your credit score if you don’t know where to find it. To ensure there aren’t any surprises when you apply for credit, you can get your FICO Score at these places:

• www.experian.com
• www.equifax.com
• www.myfico.com

Many of your financial institutions provide access to your FICO^® Score as well, for free! Check to see if your lender participates in the FICO^® Score Open Access program here.

Having a clear understanding of how your credit works, paying your bills on time, keeping your credit card balances less than 30% of the entire credit limit and most importantly, communicating with your creditors if you are unable to pay your bills, are easy ways to help manage your credit.

To take advantage of free credit educational and counseling sessions as well as learn more about the myths and facts about FICO® Scores, check out ScoreABetterFuture.com and @ficoscoreabetterfuture on Instagram. Join me and register for FICO’s upcoming, virtual community education and financial empowerment conference this month.

For more information on your FICO Score and to stay informed as you manage your credit health, check out the links below:

• https://www.myfico.com/credit-education
• Protecting Your Credit During the Coronavirus Outbreak
• Prepare & Recover: FICO® Score Checklist for Coronavirus

You can join me and register for FICO’s upcoming, virtual community education and financial empowerment event on Tuesday, June 30 by visiting this link.

It’s not difficult to check your credit, in fact you should be able to access it in the palm of your hand at all times. Learn about free ways to see your credit report and score whenever you want.

Did you enjoy this video? Subscribe to see more!

http://bit.ly/1KeQ8gg

Follow me to get more demystified financial advice.

www.dominiquebroadwa.wpstagecoach.com

Instagram: @dominiquebroadway

Twitter: @msfinancecoach

Facebook: www.facebook.com/msfinancecoach

Thanks for watching!

Repayment Options For Student Loans #1 – Standard Repayment Plan

If you choose this plan, you’ll pay at least $50 per month (typically much higher if you’ve taken out the average student loan amount) for up to 10 years. This popular plan, chosen by 2/3 of all direct loan borrowers, has its perks! You’ll pay off your loans quicker and pay less interest than you would with other plans. However, this plan is for those who feel financially stable enough to make the higher payment typically required.

Repayment Options For Student Loans #2 – Graduated Repayment Plan

You will start out with a relatively low payment and your payment amount will increase every two years. This plan is great for those who aren’t comfortable making large payment initially but believe their income with steadily increase over time, allowing them to raise their payment gradually. The great thing about this plan is, you’ll still pay your loan off in 10 years. However, you will pay a bit more interest than if you chose the standard plan.

Repayment Options For Student Loans #3 – Extended Repayment Plan

This plan is simple. Your payment can be fixed or graduated but instead of 10 years, you’ll be allotted up to 25 years to pay off your loan. The benefit? Well, stretching the time out typically allows for a smaller payment but you’ll definitely pay more interest in that extra 15 years. It’s important to note, there are eligibility requirements to qualify for this particular plan. You must have over $30,000 in outstanding loans as a Direct Loans borrower OR a FFEL Program borrower. Example: John owes $12,000 in FFEL Program loans and $32,500 in Direct Loans. John’s Direct Loan balance qualifies for the Extended Repayment Plan but his FFEL Program loans do not.

Repayment Options For Student Loans #4 – Income Based Repayment Plan (IBR)

Struggling to make your set payments? Don’t stress. You may be eligible for the income based repayment plan. With this option, your monthly payments will be capped at 15% of your discretionary income. Each year, you will be required to submit documentation of your income (tax returns) and your payment will be reevaluated based on income and family size for up to 25 years. If you haven’t paid off your loan in full after making qualified payments for 25 years, the remaining balance will be forgiven. Note that you may have to pay income tax on that forgiven amount. Find out if you qualify for this option here!

Repayment Options For Student Loans #5 – Pay As Your Earn Repayment Plan (PAYE)

Maximum monthly payments will be 10% of your discretionary income. Like the IBR, the payment will be adjusted each year based on income and family size and you must qualify to use this plan. This plan has a repayment period of up to 20 years. As with any extended repayment period, your payments will be lower but interest paid will be higher.

Repayment Options For Student Loans #6 – Income Contingent Repayment Plan (ICR)

Payments are based on your adjusted gross income, family size and the total amount of your Direct Loans (Federal Stafford Loans  and FFEL not eligible). You pay based on a 12 year repayment plan that’s multiplied by an income percentage factor or 20% of your discretionary income, whichever is less. To take advantage of this plan you don’t have to qualify for a financial hardship as you would with IBR or PAYE.

Still worried about your student loan payments? Not sure which payment plan is right for you? Need help fitting your payment into your budget? Set up a call with Dominique to get everything straightened out!

1. Apply for Income Based Repayment To Get Out From Under Your Student Loan

There are several income based repayment programs that can help struggling professionals by lowering their monthly student loan payment to a percentage of their income, usually between 10 and 20%. Many people do not apply for these programs, assuming that they earn too much. However, the vast majority of working people qualify.

If you have a high-earning spouse, there are still ways to qualify for income based repayment. In most cases, you can qualify based on your income alone if you file taxes separately. This will change your tax rates, however, so talk to an accountant to be sure that you will come out ahead financially.

2. Consolidate Your Loans To Get Out From Under Your Student Loan

The Direct Loan Consolidation program can help people struggling with student loan debt to combine their various debts into a single affordable payment. Be sure to select Income Based Repayment as your option if you qualify! There is a considerable amount of paperwork to apply to this program, but it is a one-time application process that will likely leave you with a more manageable payment plan.

Applying and getting approved can take a month or more. Many people assume that they do not have to make their student loan payments at this time, which is not true. Continue making your payments as usual until you have been approved and given a Loan Summary Sheet with your new payment procedure and amount.

3. Set Up Automatic Payments To Get Out From Under Your Student Loan

Some lenders will give you a lower interest rate if you do this, which will cut back on the amount of debt you pay in the long run. In addition, automatic payments ensure that you never miss a payment. It is way too easy to forget a single payment and eliminate your chances of getting onto new repayment programs as they arise. For example, you only qualify for loan forgiveness after 120 consecutive on-time payments, so making your payments on time can save thousands or tens of thousands of dollars.

4. Consider Graduated Payments To Get Out From Under Your Student Loan

If you are in a field where you will begin with a low income and eventually make a great deal more, you can ask for a graduated payment plan. This is helpful for professionals such as physicians, who begin work as lowly paid residents and then must build a practice before reaching their full income potential. With graduated payment plans, your loan payments will start very low and then gradually increase every year. Only go this route if you are convinced that your income will be increasing every year as well, because it is more difficult to modify these types of loan repayment plans.

5. Have Your Loans Forgiven as Soon as Possible To Get Out From Under Your Student Loan

Loan forgiveness is available after you have made 120 consecutive loan payments according to your agreement. Every time you do not make a payment, the clock must restart. The more payments you miss or defer, the longer this will take and the more you will have paid by the time your loans have been forgiven.

There are several different loan forgiveness programs, each with different requirements. New programs are added regularly, so make your payments on time and keep up on the latest developments. Even if you do not qualify for any programs now, make your payments on time and hope that a program for you is added in the future.

Student loans can be an immense burden. However, there is no need to feel trapped. Thanks to several repayment options and programs, many people will only need to make a small monthly payment for a decade. While this is a long commitment, it is nothing when compared to the value of an education. Soon, you too will be out from under your student loans and ready to move on with your life.

Jessica Kane is a professional blogger who focuses on personal finance and other money matters. She currently writes for Checkworks.com, a leading supplier of personal and business checks.