Do Your Student Loans Impact Your Credit Score?
Student loans can impact your credit score in various ways. They can be frustrating and even overwhelming. The last thing you need is for them to hurt your credit, too. No matter the type of student loan you have, it’s a factor when it comes to your credit score. A loan is a loan: it signifies money you’ve borrowed. You’ve committed to pay it back.
The good news is, student loans can actually help your credit score if you pay them on-time. But let’s look at both sides here. We’ll note how your student loans can affect you both positively and negatively.
Let’s Start with the Positives
Your student loans have long repayment periods, right? That can be a great thing for your credit. Your score receives boosts over the course of that lengthy credit history. As you make your payments in-full and on-time, those installments add up. They help you build credit. You’ll see the rewards reflected in your score.
Be encouraged! If you’re handling your repayment with care, you’ll see your score rise. Make at least the minimum payment each month. You might be putting less toward other life goals you have, but you’re showing that you’re determined to repay what you borrowed. Keep those student loan accounts in good standing. If you’re skipping payments, that’s where the negative credit score impact kicks in.
Student Loans Can Also Have Negative Impacts on Your Credit Score
Payment practices definitely matter. You want to avoid defaulting on your loans and making late payments. This can actually devastate your credit. It’s important to manage your budget so that you can make the minimum payment(s) every month.
On-time payments can certainly help your credit. But late payments affect your credit history. This kind of practice hurts your score, and the negative marks stay on your report for seven years. Even if you only skip a month, you can be reported in as early as 30 days after the due date.
Look into income-driven plans if you can’t afford the monthly minimum. Refinancing for more favorable terms might also be an option for you.
Delinquent accounts are terrible for your credit. You want to steer clear of collections. When it comes to lenders, they don’t just see “late payments.” They’re going to see “lost revenue.” It’s not a step you want to take. For a lender, they see your financial character and debt responsibility (or the lack of) in your credit report. Going into default reflects poorly, and lenders won’t be inclined to trust you.
Did You Know?
• Did you know that 35% of your credit score is represented by payment history?
• Did you know that student loans add to your “credit mix?” You’re adding variety to your report with student loans, an auto loan, credit card, etc.
• Did you know that 15% of your credit score is represented by the length of credit history? Many student loans come with 10-year repayment plans.
Will My Credit Score Keep Me from Getting a Student Loan?
It won’t keep you from getting the loan you need for school. Federally funded student loans are offered to students with good or bad credit. Outside those, your credit score may affect which types of loans you can secure. And it will also impact the interest rates available to you.
If you have good credit as a student, the door will be open to private loans for additional expenses that federal loans don’t cover.
Want to Talk?
At White, Jacobs & Associates, student loan issues are a common credit battle with our clients. Our aggressive approach to traditional credit repair works, though. We’re experienced, and we’ll never bring you into our program unless we think you’re a good fit.
Just know that we offer a no-cost consultation. If you’re ready for answers and improvements regarding your student loans and credit score, reach out today.