Will school loans affect my credit rating? - Limited/Bad/Fair Credit Questions


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Credit Card Applications » Questions » User Questions » Limited/Bad/Fair Credit » Will school loans affect my credit rating?

Will school loans affect my credit rating?

Answered on | Updated on October 21st, 2011
The content is accurate at the time of publication and is subject to change.

Yes, it does, but not much more than anything else there that could possibly take a toll on this valuable number. Yes, the debt you are likely to gather from your student loans is going to be somewhat astronomical and potentially the biggest of your life (not to scare you or anything). But if you handle it effectively and like the adult you are on your way to becoming, you should be relatively fine.

Remember that every aspect of your financial future will be forever shaded by your credit rating, whether it is one you can be proud of or one that makes you shudder.

In order to combat burgeoning loan debt correctly, here are several steps you can take:

To start with, you can begin by making interest payments. Factor what you need into your budget, along with whatever other financial necessities you must worry about. Go along and make those payments, and on time, too. You can also defer if you think that is 100% indispensable. But it’s smart not to if you can, as interest, well, adds up fast.

Typically, there is a grace period attached with student loans. Take advantage of this time; you will thank yourself later! According to most calculations and lenders, the grace period will last anywhere from a half year to a whole one. This is because those that will be demanding $$$ from you want to wait until you are “financially stable.” That might seem like a dream to some of us in more untraditional career paths, but these grace periods really have good intentions at heart.

Although, if you are considerably fortunate and land that prized job with the big paycheck, you might want to take some of that said paycheck and put it aside. From there, perhaps you can make a lump payment on your loan.

Back to the rest of us that can’t afford this option, though. Be sure to pay on time. This, again, should go without saying. Also, if you can, pay more than what is needed. This will put you in good standing with the company.

However, there is something to be aware of here! The interest traditionally associated with student loans is lower than other types. Credit card debt, for example, tends to run much higher. So when budgeting what debts to pay off first or in what order, put the debts with the most interest on a priority status.

If you can’t afford the payments, subsidize into smaller payments. This is termed going by “good faith.” Missed payments, although sometimes you have no way around them, will go on your permanent record and hurt your rating.

Last, but certainly not least, never default. Like breaking a mirror in folklore, that can repercussions that will haunt your rating for up to seven years. Do you want to jeopardize your rating for that long?

Even if it gets to the stage where you end up declaring bankruptcy, there’s a big likelihood your student loans (guess what) will not be forgiven. So take heed with that as well.

So play your student loans like you would any other money you end up owing. That is, make the required payments and pay off your balance ASAP.

Disclaimer: This editorial content is not provided or commissioned by the credit card issuer(s). Opinions expressed here are the author's alone, not those of the credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the credit card issuer(s). Reasonable efforts are made to present accurate information, however all information is presented without warranty. Consult a card's issuing bank for the terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.
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