There’s no doubt about it: providing your child with a private education can be expensive. While private elementary and secondary school tuition costs continue to rise, family incomes are struggling to keep pace with inflation. According to the National Association of Independent Schools 82.6% of families applying to private day schools require additional funding outside of their need-based aid grants2. This means the gap between the cost of private education and what families can afford continues to widen. How do we fill the gap?

While advanced planning is the best way to help cover the costs of a private school education, families may still come up short when the tuition bill is due. Many families are finding that a “private student loan” (or “alternative student loan”) is an excellent and very affordable way to meet this important need.

Most private student loans are non-secured, credit-based loans. This means loan approval, and sometimes even the private loan’s interest rate, is based primarily on the borrower’s (or co-borrower’s) credit score.

Credit scoring is a system creditors use to help determine whether or not to give you credit. There are several different pieces of information that can be collected from your credit application and credit report. Examples include bill-paying history, the number and type of accounts you have, late payments, collection accounts, outstanding debt, and the age of your accounts. Creditors use a statistical program to compare this information to the credit performance of consumers with similar profiles. Your credit score is made up of a total number of points that helps predict how creditworthy you are, that is, how likely it is that you will repay a loan and make payments when due.

Three leading credit reporting agencies are Equifax, Experian and TransUnion. These agencies track and report on your credit score taking into account all the factors mentioned above. Please visit www.myfico.com for more information. It is important to be aware of what is reported on your credit report and to correct any errors that might exist.

Below, we have outlined important tips for not only improving your credit score, but also for keeping your score healthy.

• Improve your payment history - First and foremost; pay your bills on time. Any delinquent payments and collections can have a major negative impact on your score. If you have missed payments in the past, make sure you pay them. The longer you pay bills on time, the better your score will become. And remember, credit scores are an historical report. Even if you pay off a collection account it will still appear on your credit report for the next 7 years. So the longer you manage your use and payment of credit, the better your score.

• Clean up your score - As we said earlier, obtaining a copy of your credit report is the first step in improving your credit. Make sure to clean up any errors you see on the report. Often times, a borrower will find an open collection on their report that was already paid. In this situation you should write a letter explaining the paid collection to the credit agency. They will then work to remove the error from your report. A clean and error free credit report is very important.

• Keep your credit card balances under control - How you manage your revolving accounts (credit cards, department store credit cards, revolving lines of credit) is heavily weighted in a credit score. Credit scores evaluate your revolving accounts in a variety of ways, including comparing your balance to your available credit, as well as looking at the number of accounts you have open with a balance. Always keep balances low and, ideally, pay off the balance each month rather than letting it sit there and rack up finance charges. Generally speaking, the lower the balances, the better the credit score. Also, minimizing the overall number of open accounts, even if all of them are not used, will help lower your score.