Use your student loans to increase your credit score
Updated on August 4, 2019
Being a student is hard. Building your credit is hard. Doing both at the same time? It seems impossible. However, young adults need good credit scores to rent an apartment, get good insurance premiums, and much more. Your credit score is essentially a traffic light. If it’s good, companies will want to do business with you (i.e. lease your apartment, give you good rates on utility services, etc.). If not, that’s a red light.
Thankfully, there are ways to use your student loans to increase your credit. It comes down to a few simple rules.
1. Make your payments on time
This simple skill helps you build a positive payment history and show businesses that you’re reliable. They will be more likely to give you a loan approval in the future. They will also be more understanding if you have to change your payment plan.
2. Be smart about repayment plans
This step requires you to be responsible. Keep track of your budget. If it looks like you might miss a payment, check in with your lender to set up a payment plan that works with your budget. Many lenders are income-driven and will work with you to create a plan that accommodates you.
3. Determine if refinancing your private loans is right for you
If you are struggling to make ends meet, refinancing your loans might be a credit-hero. Lenders are willing to work with you to pay back your loans without bankrupting you.
Building your credit using your student loans requires responsibility. It isn’t hard to do. Keep track of your student loans and allocate a portion of your budget to timely payments. And remember: good credit helps you qualify for low-interest rates on future loans. It’s also helpful for buying a house or good insurance. Credit scores can range from 300 to 850. Anything under 620 is considered high-risk. Most banks prefer to work with individuals with scores of 720 or higher. That might seem like a lofty challenge, but if you keep track of your monthly payments on credit cards and student loans, a positive credit score will be easier to attain.