Establishing and Maintaining Good Credit

Step 1: Know the facts.

The first step to determine your financial well being is to examine your credit report. Visit: www.annualcreditreport.com for your free annual credit report from all three credit bureaus: Experian, Transunion, and Equifax. You can also visit the following individual sites for more information:

• Experian   www.experian.com
• Trans Union   www.transunion.com
• Equifax   www.equifax.com

Step 2: Know your education debt.

The second step to determine your financial well-being is to know your creditors and the terms of the education debt that you presently have.  The majority of the students at the Law Center borrow from either Total Higher Education (T.H.E.) or Access Group, however even if you use a different lender, the debt calculators that these lenders provide will allow you to analyze your total debt burden:

• Total Higher Education
  https://www.theloanprogram.org/tlc/calculators/repaystrategycalc.aspx
• Access Group
  www.accessgroup.org/DebtMan/law.htm

It is important to note that some lenders sell student loans, so the company you borrow from may not be the same company to which you will correspond when you go into repayment.  Some lenders may retain the promissory note, but will have other companies service the loan by processing payments, billing and correspondence.  Your lender is required to inform you of any of these arrangements.

If you have a Perkins Loan from Georgetown and/or your undergraduate institution, the school acts as the lender, and may have another company servicing the loan. At Georgetown, the Perkins Loans are serviced by ASFA Data Corp. In addition, if you have a Law Center Loan through Georgetown Law, that loan is also serviced through ASFA Data Corp.

Step 3: Know your limits.

The third step to determine your financial well-being is to analyze your short term debt, which usually consists of credit card debt.  Before entering Georgetown, make every effort to reduce your debt as much as possible. While at the Law Center, try to remember that you are a student, and try to live on a student's budget. Ideally, you should reduce your use of credit cards to zero. Evaluate your open credit lines and determine if you can pay them with your income. Avoid using loan money to service your credit card debt. You will only be changing the name of your creditor, not the fact that you owe the money and will have to pay it eventually. 

"Sales" are not a reason to charge your cards to the limit. Purchase items that you can pay off within a short period of time so interest charges do not eliminate the "sale" savings. Save your credit line for emergency use. 

Step 4: Be a smart consumer.

The fourth step on your way to financial well-being is to be a smart consumer. If you must use credit cards, reduce your credit card expenses as much as possible. You can start by eliminating cards that have an annual fee and offer no other benefits. Compare interest rates, and eliminate your cards with the highest interest rates, especially if you "revolve" you balance from month to month. Don't stop there - be a smart consumer and compare all terms including grace periods. There are some cards that have an annual fee, but low interest rates. These may actually be better for you if you "revolve" a balance from month to month.

If you want to "force" yourself into paying the balance in-full each month, you may wish to consider a charge card such as American Express instead of a credit card. Know your own credit usage pattern and choose the best card for you. Don't use department store cards since they often have interest rates in excess of 20% per year. To get information about low rate/low APR cards you can visit the following site: www.bankrate.com

Step 5: Know when you need help.

The fifth step to on your road to financial well being is to know when you need help. If you are not sure where to turn, you may want to consider visiting The Consumer Credit Counseling Service website at: www.consumercredit.com. The CCC is a non-profit organization which can help you avoid even greater difficulties with your debts by possibly reducing your monthly payments and restructuring your consumer debt to allow you to pay it more quickly. Through arrangements with many creditors, they may be able to lower your interest rates and bring your accounts back into a current status. If you need assistance, don't delay.

If you have entered repayment on your education loans, but are experiencing a period of unemployment, you can ask your lender for an unemployment deferment on your Federal Stafford, Graduate Plus, or federal consolidation loans. The Unemployment Loan Deferrment Form should be sent directly to your loan servicer when complete, not to Georgetown Law.

Step 6: Put it all together.

The final step to determine your financial well-being is to create a financial plan and stick to it. You may use the planning materials provided in the The Financial Aid Guidebook. Determine what your income and your expenses for necessities (food, clothing, housing, insurance, etc.) are per month and go from there. Remember, the key word is necessities! Do the same to project your post-graduation budget. 

Make a conscious effort to determine your "luxuries" allowance and try to reduce it as much as possible. The next time you’re contemplating the purchase of a “luxury”, think of this:  If you have to borrow a commercial loan to pay for a luxury, such as a movie ticket, while in school, that $7.50 movie ticket will end up costing $20 by the time you pay off the commercial loan and all its interest charges. Avoid these high prices by using funds from work study or other part time employment to pay for your luxury purchases.

Step 7: Contact us for help!

If you have questions about your credit, please contact our office, and one of our counselors would be happy to meet with you. We can be reached by phone at: (202) 662-9210 or by email at: finaid@law.georgetown.edu.