If we look at the statistical information regarding the amount of loans students are indebted to pay upon their graduation from college, we will immediately realize that reality is daunting. For this year, the vice president and the editor of Edvisors.com, Mark Kantrowitz reports that around $1.2 trillion is held in debt. However, if the student applying for student loans inquires that - do student loans affect their credit? They should know certain things before getting a favorable answer.
If the amount of money held in debt is alarming, there is a ray hope of the college going students and their parents. If the student tackles the loans properly, with responsibility and accountability, the loan will help to boost up their credit score. This enhanced credit score will make the graduates eligible for their first accommodation loan, car loans, and most importantly for their first indiscreet credit card.
How do student loan affect credit scores?
In this respect, student loan has a silver lining to it as it help them to augment their credit score. So first of all let us see how the credit score ad student loan are interlinked? Depending on how often or how early you pay back the loan you have taken for your academic purposes, your credit gets impacted positively or negatively. Student loans are known for have prolonged reimbursement duration. In this respect, pertaining to the long credit time period, your credit score, consequently gets an increase. In other words, if you pay back your loans on time or every month when the payment is due, you will build your credit in a positive way. On the other hand, if you show careless attitude towards repayment, the credit score will impact adversely.
Do student loan affect credit score positively? Here are some of the ways
It is necessary for you to understand all the techniques of loans that may impact your credit score so that you appear creditworthy before the lenders. So, below are some of the positive ways which affect your credit score.
On time payments impacts 35% of your credit score
In order to apply for student loans, you need to keep some important things in mind. Firstly remember that 35% of your credit score is dependent on how prompt you are regarding repayments. Secondly, student loan is an exception to such loans that are not reported on credit bureaus.
So, if you pay back your student loan on time, it will have a positive impact on your payment history and will make you appear as creditworthy in front of the moneylenders.
Even though if you do not have a credit card listed on your identity, then paying back student loan will help you to establish an improved credit score from an early stage.
An extended credit history equals to a long repayment duration
It is important to note that the repayment period of student loans is normally ten years. And you should also remember that your credit history is also dependent on how much longer you hold back your due payments. In fact, 15% of the credit score is influenced by your repaying strategy.
So, here is a piece of advice for all the students who opt for loans. If they ask do student loan affect credit, the answer is in affirmative. But if they want their credit score to be positively affected then they need to avail the opportunity of quicker recompense of their borrowings. And of course if the 15% of your credit score gets affected by long repayment period, then there is not sufficient reason to stay in dues for a long time.
How do student loans affect credit score negatively?
Keep in mind that if you are utterly careless and cease to show any sense of responsibility towards tackling and managing your student loan repayment, then your credit score and credit history will get acutely impacted. If, on one hand, payment history offers you a helping hand to gain access to loans, it can hurt you too. If you pay back late then for seven years, your credit report will show glaring bad marks as you ceased to keep a book-keeping to manage all your dues. Your money lender will report your callous approach towards dues thirty days after your due payment date. Therefore, do not even think for a second to miss monthly payment out of your carelessness.
In this respect, applying for student loan allow you to critically analyze that do student loan affect credit score? Look at both sides of the picture. You will come to the conclusion that it is always better to repay them on time even though they have a long credit period.
