Cleveland Clinic Lerner College of Medicine

of Case Western Reserve University



   
Tuition/Financial Aid > Money Matters > Credit Cards

Credit Cards



Credit is an increasingly important part of medical student financial life. Stories abound of students seeking loans and finding that their adverse credit ratings preclude their eligibility. This is particularly true of students who have been working for some years, but it is possible to develop a bad credit rating anytime.

Establish and maintain good credit by limiting the amount of credit and number of credit cards you use, paying bills on time and paying them off every month. Charging more than can be paid in one month is a bad habit and can lead to problems as interest accrues. Be sure to use credit cards with NO annual fees, and try to pay off consumer debt prior to entering medical school. Additional financial aid will not be awarded to pay off debts.

If you cannot obtain a loan because of a negative credit rating, institutional funds will not be awarded to replace that loan. Request a free copy of your credit report before matriculation to ensure that all information being reported is correct. 
 

Free Credit Report

You can request a free copy of your credit report every year.

Online  You can request a copy online at annualcreditreport.com (you must provide your Social Security number). You will be asked questions that only you would know the answers to. This information is already on your credit report. At that website, you can get credit reports from all three of the major credit reporting agencies at once or you can stagger your requests to stay in touch with your credit activities, say, every four months. For example, you can request a credit report from Experian in March, Equifax in July and Trans Union Corp in November. Each credit reporting agency must give you one free credit report a year at your request. When you order online, be prepared to print your report because you can access the free report just once a year.

Telephone/Mail  Call 877.322.8228 or ask for a form from the Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

TIP: Do not contact the three nationwide consumer reporting companies directly. They provide reports only through the above-mentioned methods.

Look for inaccurate information on your credit report, and report any inaccuracies in writing to the credit reporting agency. The agency has 30 days to investigate and report back to you. If your request results in a change, they must send you a corrected version of your credit report for free. Your credit report does not include your credit score; for that, you must pay a fee.

Negative information can stay on your credit report for seven years (10 years for a bankruptcy). There is no time limit on reporting criminal conviction information.

TIP: You are entitled to one free credit report a year from each agency. However, the companies will try to sell you additional services for which, if you agree to, you will be charged.

Credit troubles are highlighted on your report by an asterisk or a box. They are considered “derogatory remarks” for which most lenders will demand explanations before granting credit. Repairing a credit report usually requires a written explanation about why a particular account wasn’t paid or was paid late. If you don’t have a reasonable explanation, you will have to establish a track record of 12 to 24 months of timely payments.

Maintain your good credit when loan repayment begins. Lenders charge a stiff collection fee on top of principal and interest if loan payments are not made on time. Defaulted loans are reported to credit bureaus and adversely affect eligibility for credit cards, car and home loans, and loans associated with setting up a private practice.

Tips for Maintaining Good Credit

Developing and maintaining a strong credit record will allow you to borrow the funds you’ll need to fulfill your educational dreams and successfully achieve your other long-term goals.
  • Identify and write down your financial goals. How much will you need to earn to achieve your goals? And remember, major goals like buying a house probably will require that you have good credit so you can obtain a mortgage at a reasonable cost.
  • Develop and follow an affordable monthly budget. Live below your means while you’re a student; learn to stretch your dollars; be thrifty.
  • Pay all your bills on time. Just one late or missed payment can have a noticeable negative impact on your credit score, and the negative influence of that missed payment can last for a number of months after you’ve brought your account current. Most items remain on your credit report for at least seven years and can influence your credit score.
  • Minimize your credit card debt. Avoid charging more than you can afford to repay in full each month. Keep credit card balances to no more than one-third of your available credit limit. Get in the habit of using cash, not credit cards, whenever possible. Credit card debt that carries over from month to month can be very costly and may lower your credit score.
  • Check your credit report for accuracy at least once a year. Promptly notify the reporting agency of any errors; it can take several months to correct those errors.
  • Maintain accurate financial records. Keep copies of all documents relating to your financial activities. At a minimum you should retain all loan documents until the corresponding loan is fully repaid. These documents should include the application, promissory note, disbursement and disclosure statements, loan transfer notices, and lender correspondence.
  • Notify your creditors immediately whenever your address changes. Typically you can provide information updates by phone or via the creditor’s web site. But remember, it’s your responsibility to keep them informed.
  • Borrow the minimum amount needed to achieve your goals. You’ll have to repay all that you borrow with your future income. Will that income be enough to cover all your future living expense, including estimated monthly education loan payments? Minimizing your in-school borrowing will increase the chances that you’ll be able to afford the financial future you desire once you have your degree.
  • Limit the number of credit card accounts you maintain. You probably don’t need more than three major credit card accounts. Avoid opening new department/retail store charge accounts; they typically can only be used at the store that issued the card and they tend to have the highest interest rated of any credit card.
  • Be careful about opening new credit card accounts and closing older ones. It’s beneficial to have the longest possible history regarding the age of your credit card accounts.
  • Save before you spend. Set aside at least a small amount at the beginning of each month before you start spending your money for other things, so that you’ll be prepared for an emergency if one occurs.

©2003 by Access Group, Inc.

Using Credit Cards

Be very careful about how you use credit cards. In fact, it’s probably best if you use cash rather than credit cards when making purchases. Consumer credit is not an investment; it’s simply a means of improving your standard of living on a temporary basis. Credit card and other consumer debts should be paid off as quickly as possible. You won’t be able to borrow additional education loan funds (over and above the cost of attendance established by your school) to pay your outstanding credit card debt.

Although it may seem that credit cards can make life easier, that convenience can create a host of problems including credit-related issues such as missed payments (resulting in a poorer credit score) and other difficulties when stress caused by the credit card debt begins to adversely affect academic performance and other aspects of your life. Know and understand the “Credit Card ABCs:”
  • A credit card is helpful in emergencies, but emergencies rarely happen at the mall!
  • Buying something on SALE is still SPENDING, not SAVING!
  • Credit card debt is not an investment; in fact, in reduces your ability to invest!
  • Debt from credit cards can make it more difficult to achieve your financial goals!

©2003 by Access Group, Inc. (adapted)

Credit Scoring

Another measure that oftentimes is used to quantify how well individuals have managed their credit obligations is credit scoring. Credit scoring is a quick, accurate, consistent and objective method of determining the likelihood that someone will repay a future loan.

Fair Isaac and Company (FICO) first developed the credit scoring methodology and currently is the largest provider of credit scores to lenders. Your credit score is a numerical forecast based on information in a your credit report that focuses on your borrower behavior. The higher the score, the better.

Factors that influence a credit score include:
  • Promptness in paying bills
  • Total debt
  • Amount owed on all credit card accounts
  • Age of credit accounts
  • Number of credit card accounts
  • Total available credit card limit
  • Proportion of credit card balances to total available credit card limit
  • Number of credit card accounts opened in past 12 months
  • Number of finance accounts
  • Occurrence of negative factors such as serious delinquency, derogatory public records, past due accounts that have been turned over to collection agencies, bankruptcies, student loan defaults and foreclosures

©2003 by Access Group, Inc. (adapted)

Identity Theft

Identity theft occurs when an imposter takes your personal data — usually your name, Social Security number, driver’s license number, address and birth date — and uses it for their own financial gain. This person may apply for telephone service and credit cards or loans, buy merchandise, lease cars or apartments, and apply for a mortgage. They might even use your identity to gain employment, working as you.

What’s considered sensitive information? Social Security number (SSN), driver’s license number, address, date of birth, mother’s maiden name, bank account numbers and employee numbers.

Anyone can become a victim of identity theft. Take these common sense actions to lower your risk of this crime:
  • Cross-cut shred sensitive papers (e.g., pre-approved credit card offers, checks, insurance benefit statements, bills, statements and anything with barcodes), before they go in the trash. 
  • Guard your SSN. Don’t carry your SSN card and resist giving out the number unless necessary. Don’t put your SSN on checks.
  • Check your credit report yearly.
  • Block your name from pre-approved credit card lists by calling 888-5OPTOUT (888.567.8688)
  • Keep wallets and purses secured.
  • Guard your personal information. Carry as little as possible in your wallet. Get credit cards with your picture on them. Make sure that conversations cannot be overheard when exchanging sensitive information. Cancel credit cards you no longer use. 
• Password-protect your computer. If you leave it unguarded even for a minute, close the program you were working on. Watch out for internet scams.
• Avoid placing personal mail that includes checks, your SSN or account information in an unlocked outgoing mailbox (e.g., receptionist’s desk).

If you become an identity theft victim or think you might be:
  • Call the three main credit reporting agencies to assess the damage. 
  • Place a fraud alert on your SSN and have them send you copies of your reports. Look them over carefully for any fraudulent activity or inaccuracies. 
  • Call the police where you live. They need to take a report and give you a copy. 
  • Send a copy of the police report along with any fraud forms to your creditors.
  • Call and write all the creditors who have opened fraudulent accounts. Send all correspondence via certified mail, return receipt requested. Tell them this is a case of identity theft. Request copies of all application and transaction information on the account.
©2003 by Access Group, Inc. (adapted)

Credit Reporting Agencies

Equifax
216.234.7004

Trans Union Corp
800.888.4243

Experian
888.397.3742

For more help, contact:

Identity Theft Resource Center
858.693.7935
itrc@idtheftcenter.org