Do Student Loans Affect Your Credit Score?

June 26, 20220

Do Student Loans Affect Your Credit Score


You know that saying, “You have to spend money to make money?” Well, the same is true with student loans. To be clear, we’re not saying you should take out more than you need. After all, as of 2018, it’s estimated that Americans collectively owe 1.6 trillion dollars in student loan debt—and the average borrower owes over $30,000. So it’s important to only borrow what you need and no more! But just because you have student loan debt doesn’t mean this will always negatively impact your credit score. In fact, for those who’ve never borrowed before (for example: if you don’t have a car or house), taking out a student loan means building up a track record of responsibly repaying your debts—an important factor that can contribute to increasing your credit score (more on this later). Keep reading for everything else you need to know about how borrowing money for college affects your credit history!

The effect of student loans on your credit score depends on the type of loan you have.

The effect of student loans on your credit score depends on the type of loan you have. Federal student loans are not reported to the credit bureaus and therefore do not affect your credit score.

Private student loans, however, may be reported to the credit bureaus and can hurt your FICO score. Lenders report late or missed payments to the three major consumer reporting agencies (CRAs): Experian, TransUnion, and Equifax. This can lower your overall FICO score by 25 points or more depending on how much you owe, how long it’s been since you’ve made a payment and whether or not there are other negative factors in your credit report

For federal student loans, for example, the government makes the payments.

For federal student loans, for example, the government makes the payments. This means that your credit report will not show any delinquencies or late payments and thus won’t affect your credit score. If you have private student loans, however, the lender may choose to report them to one or more of the three major credit bureaus: Experian®, TransUnion®, or Equifax® (which is also owned by TransUnion).

In order to fully understand how having a student loan affects your overall score — and ultimately whether or not you’ll be approved for future credit — we need to look at two different factors:

  • Credit utilization ratio — The amount of debt compared with total available credit; generally speaking, lower numbers are better than higher ones
  • Credit history — How long it’s been since something was reported on your record

Your credit score won’t improve if you never borrowed before.

If you’re a student and haven’t had any debt before, it might be difficult to get a good credit score. Your credit score is based on your history of borrowing and paying back debt. Because you don’t have any financial history yet, there’s nothing for lenders to base their decisions on.

For example: imagine two people with perfect income levels and no debt at all. One person has borrowed money from savings or parents in order to buy furniture for their apartment; the other hasn’t needed anything because they live at home with their parents and use public transportation instead of driving a car everywhere they go. These two people would both have excellent credit scores—but only because one has borrowed money (even if it was just $200) while the other hasn’t made any purchases yet!

If you want better credit scores, start building them right now by starting small—buy yourself an ice cream cone every now and then! When applying for loans later on in life, having some kind of purchase history will make getting approved easier than if you’ve never bought anything before (and therefore can’t prove that you’re responsible with money).

A private student loan is treated like a regular loan.

A private student loan is treated like a regular loan. If you’re approved, this means that your credit score will affect the rate at which you borrow money and the amount of interest that you pay on the loan. That being said, it’s possible to get approved for a private student loan with a low credit score (as low as 600).

Although there’s no official cutoff point, most lenders restrict their loans based on credit scores between 620 and 660. However, some lenders may be willing to make exceptions if they see evidence that you have strong financial responsibility outside of student loans—for example, if they discover that you have no other debt at all or that your income-to-debt ratio is very high (in good standing with rent/mortgage payments).

If you can’t make a payment, there’s a grace period before the delinquency is reported.

When you miss a payment, it can affect your credit score.

The grace period is not a free pass to skip payments—it’s an opportunity to get back on track and make them on time or early. If you can’t make a payment during this period, contact the lender immediately for information about options for making a partial payment or setting up an alternate payment method.

If your score is high, creditors are more willing to extend credit to you.

If you are applying for a mortgage or other large loan, such as a car loan, it can be very helpful to have a high credit score. If your current credit score is below 600, you may want to consider paying off some of your debts before applying for new lines of credit. Having multiple loans will lower the average length of time on all debt. This can negatively impact your score since having long-term debt indicates that you may not be financially healthy enough to pay off all of your bills in full when they come due each month

If you want or need help improving your financial situation and understanding how student loans affect your credit score click here!

Student loans don’t automatically lower your credit score unless you’re late on payments or in default.

Student loans, which are a type of debt, don’t affect your credit score in the same way that other types of debt do.

Student loans don’t automatically lower your credit score unless you’re late on payments or in default. The only time student loan payments would negatively impact your credit rating is if they were made late (30 days or more past due) or not at all—this is known as being “delinquent” or “defaulting” on them. In either case, an unpaid loan will show up on your report as a negative item that can lower your overall score.

When it comes to paying back student loans successfully and maintaining good financial health, there’s no doubt about the importance of staying current on monthly payments and keeping balances low relative to available credit limits—but those things won’t necessarily have an effect on one’s FICO® Score at any given time; nor should they be viewed as marks against someone who has been unable to pay off their balance yet still has sufficient income coming in each month


Overall, we find that student loans have a positive impact on your credit score. Because lenders see them as an indicator of responsible borrowing habits, they can actually increase your scores over time. That’s why it’s important to stay on top of them — if you’re not in the habit yet, start by getting organized and checking your account regularly. This way you’ll know exactly what is due and when so there will be no surprises in store!