Student Loans

How Student Loans Impact Your Credit Score

You may have taken out a student loan several years ago, but have you ever wondered how it affects your credit score? In the eyes of a lender or creditor, a student loan is another debt but the financial ramifications of a student loan on your credit score are different than standard loans. Federal Student loans are managed by the federal government so they can have a different effect on your credit score than other debts.

Here are some interesting facts about how student loans impact your credit score:

Helps You Establish Credit History

When you don’t have many open lines of credit and are trying to establish your credit history, a student loan can help to boost your credit score. This can be valuable when you are just getting out of college and trying to establish credit, and when you want to apply for your first credit card.

‘Good’ Debt in Your Credit History

Even though a student loan is a debt, it is considered to be a good type of debt because it is an investment in your education. Even though you may have several thousand dollars in student loans, a bank or private lender may not frown upon that type of debt as much as you think.

Supports a Healthy Credit Score

You might think that a paying off that student loan balance will help to improve your credit but this isn’t always the case. Making extra payments could actually lower your credit score because it is an installment loan and not revolving credit. If the student loan is the only installment loan you have, your credit score might end up dropping when the loan is paid off in full.


Bringing a Delinquent Account Current Can Raise Your Credit Score

If you missed a few student loan payments, there’s still hope. Bringing your account current can raise your credit score so you can recover from that mishap fairly quickly. You could also explore the idea of a student loan repayment assistance program that will bring your account current without having to make extra payments.

Minimal Impact of Past Due Account

If you miss a student loan payment by a few days or weeks, it’s unlikely that it will get reported to the credit bureaus —at least for a while. Most federal loan lenders will wait at least 30 days before the account is past due before sending an update to the credit bureau. Still, it’s in your best interest to make that payment as quickly as possible.

Sabah Karimi

Sabah Karimi is a professional freelance writer and digital copywriter. She writes personal finance, small business, and marketing content for several mainstream websites and has an educational background in business and marketing. She also writes beauty, fitness, travel, and lifestyle content for private clients.Follow her on Twitter @Sabahk

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