Do Student Loans Affect My Credit Score?
If you’ve ever wondered how a student loan affects your credit, you’re not alone. For many students, borrowing for college is the first big financial step into adulthood. And with that step comes responsibility, especially when it comes to credit.
Student loans do affect your credit score, but that’s not necessarily a bad thing. In fact, when managed well, they can help you establish and build strong credit. In this blog, we’ll break down how student loans impact your credit, the risks to watch for and how to use your loans as a tool for financial wellness.
What’s a Credit Score?
Your credit score is a three-digit number that tells lenders how likely you are to repay borrowed money. It’s based on your credit report, which includes your history of managing debt. The three major credit bureaus—Equifax, Experian and TransUnion—each compile credit reports that lenders, landlords and even employers might check. That’s why keeping your credit in good shape is essential.
There are five factors1 that are considered in a FICO credit score:
35% - Payment history
30% - Amount of debt owed
15% - Length of credit history
10% - Types of credit used (credit cards vs. loans)
10% - New credit activity
How Student Loans Show Up on Your Credit Report
When you take out student loans, they show up on your credit report as installment loans. Each loan you accept may be listed as a separate account under your name. The information updates regularly and helps shape your credit score.
Your credit report lists your student loans details, including:
Loan Type
Loan Amount
Loan Servicer
Account Status (current, deferred, delinquent, etc.)
Pro Tip: Confused about financial terms? Take a look at our Financial Aid Glossary to learn commonly used terms.
How Student Loans Can Help Your Credit
Student loans can be a credit-building opportunity if you manage them wisely.
Here are our top tips:
On-time payments build a positive history. Making consistent, on-time payments is one of the best ways to build your credit. Even during school or grace periods, if payments are required (like with some private loans), be sure not to miss them.
Long credit history helps. The age of your credit accounts matters. The longer your loans stay open and in good standing, the better it is for your credit score.
Credit mix matters. Having both installment credit (loans) and revolving credit (credit cards) can boost your score by showing you can manage different types of credit. However, it’s crucial to not take on more debt than your future finances can handle.
How Student Loans Can Hurt Your Credit
Unfortunately, mishandling your loans can do real damage to your score. Avoid these common mistakes:
Missed or late payments. Your payment history makes up 35% of your credit score. One missed payment can cause a dip in your score. Multiple late payments or delinquencies can have a long-lasting impact.
Defaulting on your loan. Failing to repay a loan as agreed can severely damage your credit and may stay on your report for up to seven years. It also makes you ineligible for additional federal aid until resolved and can prevent you from receiving other credit like personal loans or credit cards.
High loan balances. While student loans don’t affect your credit utilization like credit cards do, a large balance may impact your debt-to-income ratio (DTI), which lenders may consider when you apply for other types of credit.
Common Loan Situations and What to Know
Here are a few common student loan scenarios and how they affect your credit:
In-school deferment. Loans are often deferred while you’re enrolled in school. As long as your loans are in good standing, deferment doesn’t hurt your credit.
Grace period. After graduation, or dropping below half-time status, you typically have a six-month grace period before repayment begins. Use this time to plan your budget and prepare for payments—your credit depends on it.
Forbearance or deferment. If you’re struggling to make payments due to hardship, you may qualify for forbearance or deferment. These options pause your payments without hurting your credit, but interest may still accrue.
Consolidation. Consolidating your loans can make repayment easier, but it may close older accounts and affect the average age of your credit, which could temporarily impact your score.
Tips for Protecting Your Credit While Managing Loans
Set up automatic payments. Auto pay ensures you never miss a due date. Some loan servicers even offer an interest rate discount when you enroll in auto pay.
Monitor your credit regularly. You can get a free credit report from each of the three bureaus once a year at AnnualCreditReport.com. It’s a good habit to check for errors or signs of identity theft.
Avoid default. Explore all your repayment options and stay proactive. Default can be avoided if you act early and ask for help.
Communicate with your loan servicer. If you’re having trouble making payments, don’t ignore it. Reach out to discuss alternate repayment options or ways you may be able to postpone your loan payments for a period of time. It’s a tough conversation but one that can save you a lot of trouble down the line.
Build Credit Wisely
So, do student loans affect your credit score? Absolutely. But they don’t have to hurt it. In fact, they can be a powerful tool for building a strong credit history that will serve you long after graduation.
The key is to pay attention to due dates and amounts, pay on time and use the resources available to you.
Explore more credit and money management tips through our Financial Literacy Tools.