A common question from anyone who has student loans is “Do student loans affect your credit?” The answer is that student loans do affect your credit score and credit report, just as any loan does. The same information that’s reported for other types of loans is reported to the credit bureaus on student loans. This includes the total amount owed, your monthly payment amount, and your payment history.
Establishing a Good Payment History
If your student loan is the only debt you’ve ever had, it gives you an opportunity to establish a good payment history. Your credit report is meant to reflect your creditworthiness. When you pay your student loan payments on or before the due date, it can help you to establish a history of making payments on time.
Missed Payments on Student Loans
Missing payments on a student loan can hurt your credit just as much as missing a mortgage payment, personal loan payment, or credit card payment. For private student loans, as soon as there’s a payment that’s 30 days or more past the due date, it can be reported to the credit bureau. For federal student loans, they may wait 90 days before reporting that you were past due.
Once a 30-day late payment has been reported, it remains on your credit report for seven years. If you miss multiple payments on this type of loan, it will cause serious damage to your credit. Another thing to keep in mind is that student loans are often reported as separate loans for each semester. While you might be making a single lump-sum payment, missing just one payment will show on your credit report as a missed payment on multiple loans.
What if You Can’t Pay Your Student Loans?
If you’re having financial problems and can’t pay your student loans, don’t just ignore them. The more past due any bill is, the more it can hurt your credit. There may be options that can help you for both private student loans and federal student loans such as deferment, a modified payment plan, or contacting the servicer to see what other options may be available. For federal student loans, you may be able to obtain an income-driven repayment plan.
It’s always better to contact your creditor if you think you’re not going to be able to make a payment when it’s due before you actually miss a payment. Your lender will let you know what options are available that can help you avoid defaulting on your loan.
Make Sure Student Loans Are Reporting Correctly
It’s important to make sure that any money you’ve borrowed is being correctly reported to the credit bureaus. A surprising number of people report inaccuracies on their credit reports, and if your lender reports a payment as past-due that was paid on time, it can harm your credit.
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