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A woman smiling after graduating with student loans

Do Student Loans Affect My Credit Score?

If you’re going to college and you’re thinking of taking out student loans to cover the costs so you can fund your education, you might be wondering what the loans will do to your credit score. It’s important to work on building up your credit rating and having the best score possible, but getting an education is also key. 

A lot of people are therefore curious about how their student loans might affect their credit scores, and understanding this can make it easier for you to control and improve your credit rating.

Key Takeaways

  • Student loans affect your credit score by showing up on your credit report. Making regular payments can improve your score, while missed payments can hurt it.
  • Your credit score is influenced by factors like payment history, total debt, credit history length, new credit requests, and credit mix. Having a variety of credit types, including student loans, can be beneficial.

How Student Loans Affect Your Credit Score

It’s crucial to understand how a student loan affects your credit score, and there are quite a few factors that need to be considered.

Yes, all your debt will appear on your credit score, so if you’ve got credit card debt or other loans alongside your student loans, these will show up too. Somebody reading your credit score will be able to see what types of debt you owe.

They will also be able to see things like how long you have had the loans, your payment history, and the amount that is still owing. This is all visible to somebody inspecting your credit statement, and it will have an impact on what kind of credit rating you achieve.

Fortunately, though, if you make regular, timely payments on your student loans, you can improve your credit score and make sure it stays positive. It’s a good idea to focus on this as much as possible because missed payments will have a negative effect and will make it harder and more expensive for you to borrow money in the future.

How Credit Score Is Calculated

Many people think that there’s only a single kind of credit score, but actually, there are multiple kinds — it’s just that most people use the FICO score and most people are familiar with this approach.

This score goes from 300 to 850. A score of 300 is the lowest and it’s considered a very poor rating, while 800 is considered a superb rating. If you’ve got a high score, you’re more likely to be able to borrow money at reduced rates.

The way that the credit score is calculated is fairly complex, and numerous factors are taken into account: five different categories have an impact.

  1. Payment history makes up the bulk of your overall credit score at 35%. It is affected by you making payments on time, and failures to do so will have a negative impact.
  2. Total debt accounts for 30% of the calculation. Having a large amount of your available credit used up indicates that you’re having financial problems, and makes lenders more wary about allowing you to borrow more money.
  3. Credit history counts for 15% of your overall score. It only counts for 15% of your overall credit score, but if you’ve got a long history of borrowing and repayments, you’ll have a better score. This is calculated based on the age of your oldest credit line and the newest one, plus the average of everything credit-related. Other factors that are also relevant is how recently you’ve used your credit lines, so this is a complex calculation.
  4. New credit requests make up 10% of the overall score. When you apply for multiple lines of credit in a short space of time, this makes you look like a greater risk and will therefore hurt your credit score.
  5. The final 10% of the score is determined by your credit mix. A variety of types can be beneficial. If you have credit cards, student loans, auto loans, etc., your score can improve.

Understanding all of these different elements and their importance is key to understanding how your credit score is calculated and what factors the lenders are using when they check whether to lend you money or not.

Students loans and your credit

How Do Missed Payments Affect Your Credit Scores?

Missed payments can have a significant impact on your credit score. While a single late payment might not always affect your score, multiple missed payments can. If you're having trouble making a repayment on time, it's crucial to contact your service provider and discuss your options to avoid further negative impacts on your credit.

Normally, when you borrow money, you’ll be told what you need to repay and when. Many loans require monthly repayments of set amounts, which pay down the debt and cover the interest on it. If you’re late on this payment, it can hurt your credit score, because it may imply that you’re struggling to cover your existing debts.

Of course, many lenders will offer you a grace period to make a payment. A single late or missed payment won’t always have an impact on your credit score (though this is somewhat loan-dependent), but multiple ones will. If you miss several payments in a row, it is likely to show up on your credit score and start having a negative impact.

If you are struggling to make a repayment on time, it’s always important to contact the service provider and speak to them about your circumstances. Discuss your options and find one that works for you.

How Long Do Student Loans Stay on Your Credit Reports?

There’s no single answer to this question; it’s very dependent on the individual. Your student loan will remain on your credit report throughout your repayment term, so if you’re paying it off slowly, it will be on your credit report for longer, while a quick payoff will reduce the amount of time. However, you should be aware that just paying off the student loan doesn’t remove it from your credit score.

The loan balance will be gone, but the loan payment history will remain in place. This can stay on your credit report for up to 10 years after your loan has been completely paid off.

However, negative information will be removed sooner, only lasting up to seven years after your first missed payment. That means if you’ve made late repayments, they could have an impact for up to seven years, but not longer.

The Role of Monthly Student Loan Payments

As mentioned above, missing a monthly payment may not have an impact on your credit score (although this does depend on the type of loan you have taken out). However, if you miss multiple monthly payments, you will see your credit score drop.

The point of monthly payments is to spread the cost of the loan out and make it easier for individuals to repay it. However, that comes with the stipulation that each monthly payment must be paid on time. It’s not likely to be a huge deal if you miss a payment for a few days because of a cash flow issue, a problem with your bank, or simply because you forgot, but if you miss a lot, they will start to show up on your credit score and affect your rating.

If you aren’t able to keep up with monthly payments, always turn to your loan service provider to discuss your circumstances and work out the best solution. Don’t just ignore missed payments and let them pile up.

How Student Loans Can Improve Your Credit

It may surprise you to learn that student loans can improve your credit score, but in some cases, they can. This is because they give you an opportunity to demonstrate that you can reliably repay the money. However, you have to actually demonstrate that by doing so if you want the positive effect.

Making regular payments on your student loans proves you are responsible with money and that you are committed to repaying what you owe, which looks good. Additionally, many people take these loans out as young adults, which helps to build up their credit score and increase the length of time that they have been borrowing for. If you don’t have many open credit lines, a student loan could carry extra weight.

If you take out student loans when you first start college, you’ll already have them as part of your account history for several years by the time you graduate. This will boost the age of your credit history, and could elevate your score. However, be aware that if you take loans out every year, you’ll potentially lower your score because you’re taking on lots of new debt.

Another fact is that, as we mentioned above, it’s good to have a mix of credit. Student loans can provide more variety, which increases your credit rating in many cases.

Related: 20 Tips to Boost Your Credit Score

Refinancing Your Student Loans

Some people refinance their student loans as a way of getting lower interest rates or more favorable repayment terms. This essentially means that another lender will buy your debt from the company that currently owns it. It can be beneficial, but you generally need good credit to make use of this approach.

Furthermore, if you have federal student loans, you’ll lose benefits by swapping to private ones. Loan forgiveness, deferment, forbearance, and income-driven repayment will all be lost, and you won’t be able to undo the switch.

Additionally, refinancing your loans can affect the “age” of the loan and may hurt your credit score. Bear this in mind before you make any decisions; refinancing can make financial sense, but it’s crucial to weigh up all the pros and cons of this and to arm yourself with as much knowledge as possible before making a decision.

Student Loans and Your Credit Score

For students who don’t necessarily have many other lines of credit or a long-standing credit history, student loans can be enormously important for establishing and enhancing a credit rating.

There are a few things that you need to consider when you look at whether a student loan is likely to improve your credit score or not, so let’s check these out.

Payment History

Remember that your payment history makes up the bulk of your credit score in most cases, over a third of your score is based on this history. A student loan will give you an opportunity to demonstrate that you can make a regular, timely monthly payment, and this allows you to start building your credit score.

However, remember that this can go both ways; missed payments will contribute to a negative credit score and make it harder for you to borrow money in the future. You could end up with higher interest rates or the inability to get a loan when you need one.


It’s also important to be aware of how inquiries about student loans work. Whenever you apply for credit, the lender will look at your credit report so that they can make a lending decision. Many people refer to this as a “hard inquiry,” and it can have a negative impact on your score.

However, many federal loans will allow you to apply for the loan without making a hard inquiry on the score. The only federal student loan that currently requires a hard inquiry is Direct Plus, which is available to parents of undergraduates, and to graduate and professional students – not to standard undergraduates.

Getting a student loan can therefore be easier because it doesn’t require the hard credit check and won’t negatively effect your credit score. However, be aware that this is only the case with federal student loans, not private ones.

Length of Credit

Because student loans tend to be long term, they can help you build a higher average credit age until they’ve been repaid and closed. You’ll be building your credit history as soon as you receive the loan, and you’ll have a long period of open, active debt that is being repaid.

This can result in a drop in your credit score once the account has been paid off and closed, but this is usually only temporary. Student loans can therefore improve your credit score significantly.

As you can see, student loans do have an impact on a person’s credit score, but they are generally positive, as long as repayments are being met. They provide you with mixed credit and help to bring age to your credit history. However, if you don’t keep up your repayments or you default on the loan, it will have a negative impact.

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