How Student Loan Debt Impacts Your Credit Score

Student studying in the computer lab

The following is presented for informational purposes only and is not intended as credit repair.

You may be thinking about taking out a student loan, or maybe you already have one, and you’re wondering how it will affect your credit score. A student loan can have both positive and negative effects on your credit score, depending on whether or not you keep up with your payments. And it affects your credit score differently from credit card debt or other loans.

Student loans and your credit report

Student loans are considered installment loans, with a starting balance that is repaid over a set period of time with a fixed number of payments, similar to a mortgage or car loan.

Installment loans are treated differently than credit cards, which are considered revolving debt. With a credit card, your debt goes up and down based on how much you charge and how much you pay off. With a student loan, your balance starts high then steadily goes down over time as you pay it off.

Student Loan Debt and Your Credit Score

Starts to build credit

In most cases, students taking out loans don’t have past credit history. This can make it difficult to get a credit card or apply for a car loan. Taking out a student loan will open your credit file and start building your credit history.

Payment influences 35 percent of your score

This can be either a positive or negative. Your payment history typically makes up 35 percent of your score in most credit scoring models, including loans and credit cards. If you’re just starting out you don’t need good credit, or even any credit, to get a student loan. But maintaining good repayment history can help you build good credit for credit cards and other loans.

Read more: The Five Virtues of Great Credit

The length of good repayment history can also affect your score. The longer you have this credit and continue to make on time payments, the stronger your credit score will be. Most student loans are on your credit report for ten years so that can help you build a solid credit score.

However, if you don’t make your payments on time, your score will be hurt. If you’ve missed payments, the sooner you can work with your lender to repay them, the better off you’ll be. Missed payments may be deferred to the end of your loan, but you’ll need to work with your lender to avoid having your credit dinged.

Student loans provide a mix of credit

Lenders like a variety of debt on your credit history and it can help to build your score. If you have a low-limit credit card in addition to your student loan, it shows that you have both installment and revolving debt. Having different kinds of debt along with a strong credit score can help you get additional credit at a lower interest rate.

Defaulting can be damaging

Defaulting on your student loan can damage your credit score for years to come. Late payments and accounts sent to collections will stay on your credit report for seven years, lowering your score. This could cause you to be unable to get auto loans, credit cards, or a mortgage.

Like most forms of credit, student loans can have a positive impact on your credit score as long as you follow your agreement and make payments on time. If you’re unable to make your payment, reach out to your lender for options before it damages your score.

Read more: Ultimate Guide to Rebuilding Your Credit

And if you’re out of deferments and not sure what steps to take next with your student loans, consider speaking with a student loan counselor from MMI. Our trained counselors can help you understand your options and connect you with the resources you need to get your student loans under control.

Tagged in Build your credit score, Debt strategies, Understanding your credit report

Emilie writes about overcoming debt, while balancing trying to eat healthy, stay fit, and have a little fun along the way. You can find more of her work at

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.
  • The National Council of Higher Education Resources (NCHER) is the nation’s oldest and largest higher education finance trade association. NCHER’s membership includes state, nonprofit, and for-profit higher education service organizations, including lenders, servicers, guaranty agencies, collection agencies, financial literacy providers, and schools, interested and involved in increasing college access and success. It assists its members in shaping policies governing federal and private student loan and state grant programs on behalf of students, parents, borrowers, and families.

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