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Financial Literacy WashU

A guide on understanding finances and becoming fiscally responsible

My first journey into the realm of financial literacy was my freshman spring. I learned about the existence of a "credit score" and how this one concept could play a role in all the major financial purchases I would make in the future. I grew up under the impression that credit was a bad term. I mean, after all, why would I borrow money to pay for something when I could just pay for it in cash?

Needless to say, this was the wrong way to think about credit. According to interest rates gathered by Informa Research Services:

  • Someone with FICO (the most common credit score used by lenders) scores in the 620 range would pay $65,000 more on a $200,000 mortgage than someone with FICOs over 760. (Most FICOs and VantageScores are on a 300-to-850 scale.)
  • On a five-year, $30,000 auto loan, the borrower with lower scores would pay $5,100 more.
  • A 15-year home equity loan of $50,000 would cost a low scorer $22,500 more than someone with high scores.

Upon learning that "no credit" meant spending more money, I became fervent in my quest of learning EVERYTHING I could on the subject of building credit. This section is an accumulation of information I learned, and steps I followed while building my credit using my first credit card. It will include information about topics such as: understanding credit, building credit, what's a credit score and how to keep your credit score at a good number.