Student loans have majorly impacted youth in the United States as more and more individuals find themselves in thousands of dollars worth of debt. If you are an individual who is constantly paying your student loans, this will affect your credit score. It may affect your credit score in a way that you do not expect though.
If you are constantly paying your loan payment on time, then your student loans can actually boost your credit score. If you pay late, then your credit score will take a hit.
It is definitely important to at least have a basic understanding of credit reports. This credit report will provide a record of your borrowing and repayment history. This credit report will also have other information like your name , recent addresses, social security number, date of birth, and information about your various of accounts. This will likely include mortgage, credit card, car loan, and student loan accounts.
For every account that you have, the report will explain the type of account, the date the account opened, the credit card limit or the amount of the loan, the loan balance, and a record of payment.
There are several major credit reporting companies. You can order a report from one of these.
Your credit score basically measures the risk that you will default on credit payments. The higher your score, the better off you are.
Major creditors will use FICO. Your FICO score will range from 300-850. It is calculated based on several different aspects of your credit report data.
Having student loan debt will not impact your credit score negatively, unless you don’t make payments or pay late. If you stop making payment, this will appear on your credit score for the next seven years. Usually having student loans actually helps you to build payment history, adds credit diversity, and increases the length of your credit history.
If you are returning to school, experiencing economic hardship, or unemployment, then you may be able to get a student loan deferment. This will allow you to not have to pay your student loans for a certain period of time. If you do not qualify for this, then you may qualify for forbearance. This is when your loan holder permits you to stop making payments for a certain period of time. These usually will not hurt your credit score.
There are several consequences to having a low credit score. You may not be able to purchase a home, find a job, obtain a car loan, or get credit cards. It’s important to realize how just simply missing payments or paying late can have a major impact on your future.