How student loans can affect your credit score

Student loans can help (or hurt) your credit rating. (iStock)

Obtaining student loans may be a necessity to help pay for a college degree. However, aside from planning on how to repay the loans, borrowers should also consider how student debt may impact their credit score. 

Credit scores are three-digit numbers that are used to measure creditworthiness. Lenders use them to decide whether to approve you for credit. 

Credit scores are based on information from your credit report, including payment history, how long you've been using credit and credit mix.


"Student loans can affect your credit score just like other kinds of debt will," said Austin Weyenberg, the founder of financial education site The Logic of Money. "Depending on how well you handle your finances, this could be great for you or it could be very bad for you."

When it comes to student loans affecting your credit score, there are several ways they can work in your favor. 

For FICO credit scores, which are used by 90 percent of lenders, payment history carries the most weight. Paying school loans on time each month can help establish a positive payment history, potentially boosting your credit score in the process. 

Credit mix and age also matter for score calculations. Lenders like to see that borrowers can be responsible by using different types of credit over time, including student loans and credit cards. Student loans may be the first type of debt you ever have in your name, which can get the clock ticking on establishing your credit age. 


Student loans can affect your credit score.  (iStock)

There are, however, a few ways student loans could work against your credit rating. Missing payments or defaulting on your loans could deliver a hefty blow to your credit score. A low credit score could make it difficult to get approved for loans, rent an apartment or get utility services in your name down the line. 

Maintaining your credit score while managing your loans comes down to good credit practices, Weyenberg said. Some of the best rules to follow for handling school loans and preserving credit include:

  • Borrowing only what's necessary to pay for school so you're not overburdened with debt.
  • Paying on time each month. Enrolling in your loan servicer's auto-draft program can make this easier and it could potentially yield an interest rate discount. 
  • Staying in touch with your lender. If you're struggling with repaying your student loans, options such as income-driven repayment, deferment or forbearance could help. 

Learn how to check your credit score and credit report to monitor how student loans are affecting your credit score month to month. Also, consider whether it makes sense to consolidate or refinance student loans

Consolidating federal loans allows you to streamline multiple loans into a single monthly payment at a fixed interest rate. Refinancing could help you combine private loans at a lower interest rate. Just remember that refinancing with a private lender might require a credit check, which could knock a few points off your score.