Do student loans help your credit score or do they hurt it?

QuestionsCategory: Credit Score / ReportDo student loans help your credit score or do they hurt it?
Alison C. asked 3 years ago

I am graduating from high school this year and I have my sights set on continuing my education at the collegiate level. However, I cannot afford it. I have heard so many mixed reviews about students loans that I don’t know if it’s worth it for me to apply for one. I don’t want to accrue a huge amount of debt and ruin my credit before I even start my adult life. Do student loans help your credit score or do they hurt it?

1 Answers
Marcus B. answered 3 years ago

First off I believe congratulations are in order, on two counts. First, you are graduating from high school and setting your sights on college – that is no small feat! Second, you are a young adult aware of your personal financial situation and you know what credit is and that it is an important part of your life. Not many of your peers can say the same. You are already ahead of the pack!

So let’s get down to business. In terms of student loans and credit, you are correct. Student loans are a tricky type of credit and should be handled with care. It is best to do thorough research before committing to anything because a student loan credit score can take a fast nose-dive if you’re unable to pay off the amount you owe.

The way student loans work are you get the money you need to cover the costs of your education, but you don’t have to start paying back the money until after you graduate. Once that day comes, the payments will start up and interest will kick in. Just like any other line of credit, there will be a minimum monthly payment you are required to pay throughout the life of the loan. In certain circumstances you can defer payments, but student loans can never be left unpaid. In other words, you can not file for bankruptcy with student loans in the hopes of getting rid of them. If you cannot pay them off you will be in trouble. A student loan delinquency credit score can hit rock bottom and will stay there until you can afford to pay off the debt. Unfortunately, the longer you wait to pay off the debt, the larger the overall amount you owe gets.

However, if you are wondering does paying off student loans help credit score the answer is yes! Paying off student loans help credit score increases if you pay the minimum monthly payment on time and in full each and every month. You get bonus points if you can pay a little over the minimum amount too – you will lower the amount you owe overall and your credit score will increase.

If you are applying for a new line of credit, ask your lender which credit bureau they will be pulling your credit report from. If you know this information you can pull your report and score from the same bureau and check it for accuracy and to get a better idea of where you stand before you apply.