Accentuate the Negative Any time you fail to make a student loan payment on time, this is going to have a negative impact on your credit. But making your student loan payments on time every month can strengthen your credit. Student loans are often treated as installment plans on your credit report.
A loan deferment, in which payments are temporarily postponed, might hurt your credit. Or it might not. Loans that are unsubsidized, with interest, can grow during a deferment. But according to U.
In any situation, putting a loan in deferment is better than not making payments. Another thing to note about deferments and loan repayment is that if your student loan becomes delinquent, you may no longer be eligible for a deferment.
Best Way to Improve My Credit? Another gray area is upon us. Working hard, making extra payments, and paying off your student loan balance will help your credit, right? Paying off your student loans too quickly can actually bring your score down, according to AllTuition. Having multiple types of credit, such as a loan and credit cards, can improve your credit. So keeping that big student loan balance around, especially with a lower income ratio, is going to hurt you.
There are many pros and cons of student loan consolidation. On one hand, consolidation could make managing your loans easier by only paying one lender each month, potentially lowering your monthly payment, and even having a chance to lower your interest rate depending on any credit improvements since you took out the loan.
On the other hand, consolidating could mean you lose certain borrower benefits e. But does it negatively or positively affect your credit? Just like the other issues, it depends on your situation. As always, research the options but consider what is going to be best for you.
This will lower your average account age and show a reduction in that account history. Not only will ignoring your student loans ruin your credit, but it will have a slew of other negative results on your life. If you had a parent or relative nice enough to co-sign your loan, non-payment will hurt their credit, too.
If you miss one student loan payment, even by a day, your loan will be considered delinquent. According to the U. Department of Education, loan services will report your delinquency of 90 days to the three major credit bureaus.
But for private lenders, that default could be far less time — even one missed payment, depending on the lender. Having a loan in default is going to be a huge red flag to possible lenders, not to mention to landlords when trying to rent an apartment, utility companies, or even a potential employer in some cases. Defaults stay on credit reports forever until you pay the loan in its entirety, according to Money Crashers.
Default also means you could be ineligible for any future financial aid or loan benefits, such as applying for a deferment or student loan forgiveness. Also, depending on your lender, if you go into default, your wages could be garnished for federal loans, you may not get a tax refund, and you could be dealing with collection agencies. Explore every possible option before defaulting on your loans. Depending on your lender and loan details, apply for a deferment or an income-based repayment plan.
You can also consider various types of student loan forgiveness, including finding a job that pays your loans , volunteering to put money toward your loans , joining the military , or moving to a place that pays your loans. Student Loans and Good Credit Always pay your student loans on time. Plus, some lenders offer a small interest-rate reduction if you enroll in automatic payments from your checking account. If you opt for auto-debit, be certain you have sufficient funds in your account.
On-time payments are the best thing you can do for your credit. Sign up for e-mail alerts, text alerts, set a reminder on your phone, and write it on your calendar. Keep all of your contact information up to date. Keep track of your loans.
Unfortunately, many people lose track of all the loans they took out in college. Avoid late payments and loans going into default at all costs. Make it a point to check your credit report from each of the three credit reporting agencies — Experian, Equifax, and TransUnion — once per year so a total of three times.
This way you can confirm that your positive payment history and balance are accurately reported by your student loan lenders.