Does Income Driven Repayment Affect Your Credit?

IDR (Income Driven Repayment) does not affect credit in a bad way. Many people think that IDR is a less-than-minimum payment, but it is not. IDR is an acceptable payment plan, allowed by law. As long as the IDR payment is made on time, your credit will look fine.

Will it Affect the Ability to Buy a House or Make a Major Purchase?

Not at all, it could help it. The debt-to-income ratio looks at monthly payments, not necessarily your total debts. The lender wants to know that you are not overburdened and can afford the mortgage payment in addition to the bills you already have. Since IDR is usually more affordable than balance-based payments, you are more likely to be able to afford the monthly payment.

SOL and Credit Reporting

People are often confused by the difference between the Statute of Limitations (SOL) and credit reporting timelines. The SOL is the time in which a lender must bring a lawsuit. Federal student loans with Income Driven Repayments are not subject to the SOL. Private loans ARE subject to the SOL, based on either the State where you reside, or the State that controls the lending agreement.

The time limit to report on credit reports has nothing to do with SOL. Just because a SOL has run, does not mean a debt should be removed from your credit. In fact, a SOL may expire with no lawsuit taking place, but you still owe the debt. The lender cannot enforce it, but you still owe it. A debt is still reportable even though the SOL has run. Just because a debt is not reported on your credit, does not mean you do not owe it. Therefore, the remaining balance on your student loans Income Driven Repayment plan is a debt that could show on your credit report.

Monitoring Your Credit Report

Checking your credit is always a good idea, especially if you are going to make any major purchases. It can also help you identify any fraud alerts from your bank. Before you get upset about your credit score, confirm the accuracy of the reports and your Income Driven Repayment. Accuracy of the information on your credit report including any student loans will bring about accurate credit scores. If the information is incorrect, see the credit reporting company with the inaccuracy for methods to submit corrections.

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