The way you handle borrowed money can either help or hurt your credit score, whether it’s a mortgage, car loan, credit card, or another type of loan. A common question from people who have taken out student loans is “How are student loans reflected on my credit report?”
Like any other type of loan, student loans are reported to the credit bureau, and they are taken into consideration when your credit score is calculated. The same information that’s reported on any other type of borrowed money is reported, which includes your payment history and the total amount owed.
How are Student Loans Reported?
On your credit report, your student loans are categorized as installment loans. This means you pay a fixed payment over a certain amount of time like car loans or personal loans. Most of the time you aren’t required to make payments on student loans until six months after you graduate, but these loans show up on your credit report soon after they’re opened. They’ll show as “deferred” until you’re required to make payments.
When you go into repayment, you may pay a lump sum to a single lender, but that’s not what it looks like on your credit report. Your student loans are usually listed as separate loans taken for each semester you were in school.
Your Credit Score and Student Loans
When calculating your credit score, student loans have the same impact as any other type of loan. There’s no difference in how either private or federal student loans are reported and taken into consideration.
Your student loans affect your total debt and your debt-to-income ratio. Potential lenders consider how many payments you’re responsible for making each month, which could affect whether or not you can obtain any other loan.
How Student Loans Can Help Your Credit Score
Student loans give you an opportunity to establish a positive payment history. Make your payments on or before the due date and pay extra whenever you can. Contact your lender immediately if you’re having money troubles and think you might not be able to make a payment. If a payment goes more than 30 days past due, it will be reported to the credit bureau and this stays on your credit report for seven years.
Another factor that’s used in determining your credit score is your credit mix. Ideally, your outstanding credit should be a mix of different types of accounts such as installment loans, credit cards, and a mortgage. Having student loans in the mix helps you diversify the credit showing on your credit report.
Are Your Student Loans Reporting Correctly?
Like any other type of outstanding credit, it’s important to make sure the information on your credit report involving your student loans is accurate. Errors on credit reports are more common than you may think, and if you find any errors, they should be disputed immediately.
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