Student Loans: Do loans affect your credit score?

The majority of student loans are installment loans, which you pay back over a predetermined amount of time. As a result of the lender reporting this to credit agencies, you start to build up a history.

You are entitled to access the data that the credit bureaus maintain. Through the end of 2022, you can check the reports from all three main bureaus once a week.

Every time you make a payment, on time, you’ll start building a strong track record of handling credit.

I want to be very clear about this: Not one penny of debt is being “canceled” or “forgiven.”

This debt is being transferred from the 13% of the country with student loan debt to the 87% of the country that does not have student debt. pic.twitter.com/2RYtsCEqyv

— Senator John Thune (@SenJohnThune) September 7, 2022

What you should know about how student loans can impact your credit score is provided below.

Missed or late payments

Forgetting things occasionally has no negative effects on your credit. Your credit score won’t begin to decline until your lender informs one or, more likely, all three of the main credit bureaus about your late payment.

Depending on the kind of loan you have, it may take some time until it’s reported:

• Federal student loans: Servicers hold off on reporting late payments for at least 90 days.
• Private student loans: Lenders might report them after 30 days.

However, as soon as you miss a payment, lenders may impose late fees. Your late payment, commonly known as a delinquent, will remain on your credit record for seven years if your lender does report it.

Your credit will be harmed more severely the longer your payment is past due. For instance, if you miss a payment for 270 days, your federal student loan will default. That will damage your credit more than a 30- or 90-day late payment would.

Is refinancing an option?

Before refinancing student loans, it’s a good idea to compare rates, especially if you can do so without hurting your credit. You can prevent your credit report from receiving additional hard inquiries by choosing one of the two choices listed below.

Within a 14-day window, apply for all the loans you’re comparing. Multiple hard inquiries of the same kind, such as student loan enquiries, count as a single query under the FICO credit score model if they occur quickly.

You’ll be covered under all of the different time limits specified by the credit score model, including 14, 30, and 45 days, if you submit all of your applications within 14 days.

Through the pre-qualification procedures of lenders, obtain rate estimations. You may acquire a rate estimate from several lenders that won’t harm your credit.