Some loans utilized by students require a credit check. It is important that you understand how your credit plays a role in your financial aid and your financial life.

Your credit plays a big role in your life, which is why having good credit, making loan payments on time, and minimizing your debt are so important

There are three key factors that creditors look at when determining your loan eligibility. These are typically referred to as the three C's of credit.

1. Character: This is your personal financial character, or a look at how you have handled debt in the past. Do you pay your bills on time, pay them off early, or do you not manage money well?
2. Capacity:  How much debt do you currently have?
3. Collateral:  What type of collateral are you offering in exchange for the funds?

In the past lenders determined these three things by simply looking at your credit report. But now, most lenders use an electronic system that assigns numbers to your credit score. The number you are assigned dictates what type and how much credit you can receive. This technique is referred to as credit scoring. A credit score tells the lender how likely it is that you will pay back the loan and adhere to the loan terms.

Lenders often use a credit agency to obtain credit reports on potential customers. You have the right to receive a copy of your credit report anytime. There are three national credit bureaus that can release your credit information when you give permission.

The following information is included in credit reports

• Name
• Telephone Number
• Social Security Number
• Date Of Birth
• Address
• Place of Employment
• Tax liens, judgments, and bankruptcies
• Current loan balances, original amount borrowed, amount of payment, status, and number of late payments
• All credit inquiries for the past 24 months

Negative issues reported to the credit bureau will stay on your credit for seven years, with the exception of a bankruptcy, which stays on your credit for ten. It is illegal for information regarding race, gender, religion, national origin, checking or savings accounts, medical history, purchases paid in full, and business accounts to appear on a credit report.

The Equal Credit Opportunity Act (ECOA) guarantees equal access to credit. It is unlawful for the creditor to do any of the following:

• Discriminate against you because of sex, race, marital status, or national origin
• Ask if you are divorced or widowed
• Inquire about future plans to have or raise children
• Not consider public income as reliable as any other form of income
• Not consider alimony, child support, or other payments as income

It is legal to ask for some personal information on a loan application, such as:

• Name
• Telephone number
• Social Security Number
• Employer
• Length of employment
• Marital status
• References
• Current income
• Prior debt
• Current debt
• Bank account balances