The loan program listed on the previous page is based on the credit worthiness of the borrower and cosigner (including a cosigner increases the likelihood of being approved and getting the most favorable interest rate). Lending institutions base their decisions on information provided by one or more of the three major credit bureaus - Equifax, Experian (formerly TRW) and Trans Union. The most important piece of information lenders receive from these sources is the Credit Score. Each agency has its own term for this score: the FICO score for Equifax, the BEACON score for Experian, and the EMPERICA score for Trans Union.

It is common in the industry to refer to a credit score as a FICO score regardless of its source.

You may check your FICO score with any or all of the credit bureaus by visiting www.myfico.com and purchasing one of their informational packages. The information in these reports will provide you with your FICO score and alert you to any negative information that may be on your credit report. This information will allow you to begin shopping for a loan with a better understanding of your own credit worthiness.

Continue reading for more information on:

· The establishment of a FICO score
· How your credit rating affects your interest rate
· Information from the three credit bureaus

A FICO score is calculated by a system of scorecards that evaluate an individual's outstanding debt, payment history, credit history, pursuit of new credit, types of credit in use and other factors. In developing these scorecards, FICO uses actual credit data on millions of consumers, and applies complex mathematical methods to perform extensive research into credit patterns that forecast credit performance. Through this process, FICO identifies distinctive credit patterns. Each pattern corresponds to a likelihood that a consumer will make loan payments as agreed in the future. The score is based on all the credit-related data in the credit bureau report, not just negative data such as missed mortgage payments or bankruptcies.

In short, the FICO score is a ranking, on a scale of 300-850, which indicates the likelihood that a consumer will keep the terms of a credit, loan or mortgage agreement. The higher your score, the more likely you will be able to obtain a loan at a lower interest rate. Consumers with lower scores are considered to be "high risk" by lending institutions and while they may still be able to obtain credit, will be charged a higher interest rate to compensate for the lender's higher risk.

Consider this recent example provided by www.myfico.com:

A consumer with a FICO score between 720 and 850 will qualify for the best mortgage rate of 5.77%, resulting in a monthly payment of $877.00 on a loan of $150,000, while a borrower with a score between 620 and 674 will pay 7.58% or $1,057.00 per month. Someone with a very low score of 500-559 can receive a mortgage, but at the highest rate of 9.29% for a payment of $1,238.00 per month. So we see that the consumer with a score in the highest tier will pay $361.00 less than the person with the lowest "acceptable" score. In this example, a borrower with a score below 500 would probably not be able to secure financing without a co-borrower or significant collateral.

Because of the importance of the FICO score in obtaining alternative education loans, the National College of Naprapathic Medicine strongly recommends that all students applying for these loans have a good understanding of their own credit worthiness, including their FICO score(s).

You have a variety of options for obtaining this information.
To obtain a copy of your credit report and/or FICO score from any of the three major credit bureaus, you may contact them directly:

Equifax - www.equifax.com - 1-800-685-1111
Experian - www.experian.com - 888 397 3742
Trans Union - www.transunion.com - 800-916-8800

The cost for an individual credit report is about $9.00. It is generally an extra $5.00 to have your FICO score included with the report.

In addition to providing you with a report from their own bureau, each of the three agencies above can provide you with a "3-in-1" report which combines their own information with that of the other two bureaus. These prices vary, so you are encouraged to visit each of the three bureaus and shop for the best package for your needs.

Another option is to visit a third-party credit service, such as www.myfico.com mentioned above. These web-based services can offer individual credit reports, FICO scores, combined reports, advising services, and other products based on data received from the three major credit bureaus.

Whichever service you wish to utilize, please remember that this small investment at the beginning of your search for educational financing will make you a more educated consumer and allow you to make better decisions regarding your college loans and all other credit matters.

Good luck, and we hope to see you soon at NCNM.