When a fresher or the young student takes out a private student loan, they do not think about any credit scores. They are concerned about there career studies and life goals. But the truth is student loans can impact your credit scores. Well, it is important to understand how this loan affects your credit score and your ability to borrow. It can have both a positive or negative impact on your scores.  Let’s break it down into two parts.

Positive Impact of Student Loan on My Credit

Credit scores are calculated on various aspects such as payment history, debt levels, the age of credit, etc. if you can manage your student loan correctly then it gives a positive impact on your credit scores.

  • Paying on time strengthens your score

Payment history is the most important aspect of credit scores so borrowers can look for student loans as an opportunity to strengthen it. But yes late payments on any debt will affect their credit scores and make monthly payments on-time in students loan will be an outstanding result on a credit report.

According to the CARD (Following the Credit Card Accountability Responsibility and Disclosure) Act of 2009, to get a credit card, young consumers had to prove their financial ability to repay debts. Student loans establish their credit history which is helpful for persons who won’t able to access revolving credit. For customers with credit cards, a student loan is an installment loan, can improve the diversity of their credit profiles.


  • Help to add variety to credit mix

Credit mix or the type of credit use has less impact on your credit score. Credit mix means the variety of credit you have such as credit cards, auto loans, mortgages, etc. the more variety you have more it will improve your credit report. Well, it is also important that it has a share of a small percent on your overall score. So you don’t need to put too much stock in the credit mix.


  • Long credit history

The length of your credit history has an impact of 15% on your credit score. Generally, students loan comes with 8-10 payments year which helps you to build a long credit history. But it doesn’t mean that you stay in debt for longer if you have the ability to pay off your loans faster.


Well, the amount taken in student loans bears little impact on a borrower’s credit scores. It really comes down to the payment history, so it’s important to take on a manageable debt and take advantage of loan repayment assistance when available.


Negative Impact of Student Loans on My Credit

  • Missed payments

Well on the other side, if you missed a payment on a student loan then you can do big damage to your credit. A first missed payment can cause a good credit score to fall to even 100 points. And if you continue to miss the payments then the effects are much worse.


  • Defaulting on your loans

Late payments and delinquencies have a negative impact but accounts in the collection are worse. late payments represent lost revenue to the lenders. creditors won’t pay you if they don’t trust you whether you pay them or not.so it is important to maintain them efficiently. Well going in defaults in students loan will eventually damage your credit score and makes it more difficult to obtain further credit for years to come.


Another thing is alike in other forms of credit, applying for a new private student loan account results in a hard inquiry on that person’s credit report. It will result in falling down a few points in your credit scores. There is a short-term impact on credit scores when a new account appears separately from the inquiry on a credit report results in a slightly negative.

Related Topic: Average Credit Score

To sum up, Don’t forget these three key takeaways:

  • Student loans are treated the same as other types of loans for your credit score.
  • Having more student loan debt isn’t automatically bad for your credit score.
  • the short-term impact on credit scores
  • They can help establish a longer credit history
  • They can help you add variety to the mix
  • Focus on making student loan payments on time. It’s likely to have the biggest impact of any related to your student loans and credit score.

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