Student Loan Debt and Credit Score


Graduating from college, paying down student loan debt, starting a career and then buying a house. It’s a path that many people follow. But student loan debt can affect your ability to get a loan for a home or car. Maintaining a good credit score is one of the major expectations that any lender will have. 

Lenders like student loans

Lenders who are looking at credit history do like to see that someone has maintained regular student loan repayment. The reason for this is that regular payments on any loan, including a student loan, show that you have a credit history. 

Installment loan

A student loan is a type of loan called an installment loan. This differs from credit card payments, which are called revolving credit. With credit card payments, the borrower puts a purchase on a card and then pays off the balance of that purchase over time. Revolving credit is not considered a fixed amount of a loan because the amount of the purchase that is charged can vary. A student loan is called an installment loan because the borrower agrees to accept a fixed amount of money in exchange for making regular payments to pay it back over time.

A mix of credit

To achieve the best credit score, lenders look at a mix of credit. Student loan repayment on a credit history is considered desirable because it shows an installment loan. It can show a credit history stretching back years. And it can show the ability to pay the same amount on a loan each month. 

Late payments

Late payments on any loan can show up as a black mark on your credit score. The amount of money that you owe is not really what is considered most important in a credit history. The primary thing that lenders will look at is regular, on-time payments. Even if you cannot afford to make other payments, focusing on paying back your student loan repayment on time on a regular basis will help you the most to develop a good credit score.

It would be nearly impossible for everyone who has a student loan to make every single payment in full and on time, each and every month for the life of the loan. A single or even occasional late payment will not allow impact your credit score too much, but continued or frequent late payments definitely will.