For student loans, the greatest impact on your credit rating will most likely be related to payments. In particular, if you make payments on time and in full.
In general, the payment history is 35% of your FICO account. This is the biggest piece of cake. Only one late payment can lead to a decrease in your credit score. While the size of your credit score depends on many factors, this example from myFICO shows how bad it can get.
In this example, Alex, who has an average credit rating of 680, can lose 60-80 points from just one 30-day delay. Benecia, which has an excellent score of 780, will lose even more. Missed payment will reduce its account by 90-110 points.
Default loans or collections, which often include a lot of late payments, can damage even more. While payments really matter (moreover, in a second), there is no loan at deferment. You will not be penalized for your loans that are deferred.
If you have problems with payments, consider various repayment options so that you can pay in time.
Student loans can help your loan!
Although getting debt is usually not a good strategy for improving your credit score, student loans can still help.
Part of the calculation of FICO includes a credit set. This factor considers the different types of loans and lines of credit that you have. Having both credit loans (which include student loans) and revolving loans (for example, credit cards) in your credit report can be useful for your credit balance.
Although the credit mix is a small factor (about 10% of your credit score), it can give you a small boost if both types appear in your credit report.
Keep in mind that as soon as you pay off your student loans, there will still be a record in your credit report. However, it is possible that you can see that your credit rating will drop slightly if student loans are your only open-payment loan. But financial experts advise against avoiding paying student loans for your credit rating.
Do not sweat student loans.
Although we have reviewed this post in detail, which may affect your credit rating, you may be better off looking elsewhere if you want to increase your credit rating.
FICO says credit cards usually have a greater impact on your credit rating than student loans. “It is important to note that, although student loan debt may affect the FICO score, credit card debt has a greater impact,” writes FICO. “This is because we have found that credit card debt has a stronger statistical correlation with the future work of the borrower than loan debt.”
Do not forget about these three key ups:
Student loans are processed in the same way as other types of loans for your credit score.
You have more student loan debt will not automatically be bad for your credit score.
Focus on timely student loan repayments. This is likely to have the greatest impact on anyone related to your student loans and credit account.
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